Investment Banking Interview Questions That Get You 95% Covered

Ace the Investment Banking Interview Financial Statements Question

Scouring the bowels of the Internet for other research, we came across an old gem. Someone has uploaded UBS’s 2010 investment banking recruiting guide for MBAs.

Preparing for an investment banking interview requires a lot of preparation. Before going into an interview, research the particular bank, familiarize yourself with the deals it has done in the past or is currently working on, and be prepared to talk about the economy and financial markets.

How To Answer

You might be asked to analyze a spreadsheet, read a financial statement, discuss how you’d solve a problem in Microsoft Excel, or explain a financial term , among other things. There are a few types of stories you should always have on hand in an interview, and one of them should be about a time you made a mistake or something didn’t go as you expected it to. There are many financial analyst positions in which collaboration is integral to the job. If you’re an entry-level candidate, don’t panic if you don’t already have these. In this case, the interviewer probably wants to hear that you’ve given this career path long-term consideration. So if you’re planning to pursue a certification or have already begun to take steps toward one, talk about why you decided to do so and how you plan to achieve this goal. Organizations are trying to see how dedicated you are to furthering your education and skills, what you’ve gotten from your education, and how you apply it.

Ace the Investment Banking Interview Financial Statements Question

Accounts receivable is an asset on the Balance Sheet, whereas deferred revenue is a liability. In an interview, it is important to keep your technical overview at a high level. Start with a high-level overview and be ready to provide more detail upon request. Precedent Transaction – Since a company will pay a control premium and a premium for synergies coming from the merger, values tend to be high.

What Is Net Working Capital?

While you should prepare for the sorts of questions below, the key thing to know before you interview at Goldman is that you need to be 100% familiar with everything in your resume. The firm itself says this is the case, and most of the candidates who’ve interviewed there say they were heavily grilled on the minutiae of their CVs.

  • Honestly this information gave me a sense on how to handle my interview as well as improve my interview skills.
  • At the end of these 30 questions, we also have provided you with 14 exclusive bank-specific technical questions to kickstart your mock interview training.
  • The main difference is that you need to be more polished because everyone at this level at an investment bank is articulate and has more real-world experience.
  • This question helps an interviewer assess whether you have experience and skills making presentations.
  • Alternatively, the Gordon Growth method can be used to estimate TV based on its growth rate into perpetuity.

Get Case Study Practice with our 17 Excel-based case studies. These are VERY similar to the types of case studies you’d encounter at assessment centers in Europe or standard IB/PE interviews. You’ll build 3-statement models, value companies and build DCF analyses, make M&A and investment recommendations, and complete merger models, LBO models, and even a debt vs. equity financing model. Using the P/E ratio as an example, if an investment banker is trying to perform a valuation of a firm in the grocery store business, the first step would be to determine the average P/E ratio in that sector. This can be done by looking at comp tables, which are easily available through the Bloomberg terminal. WACC is calculated by taking the percentage of debt, equity, and preferred shares of total firm value and multiplying the individual components by the required rate of return on that security. The terminal value of the project must also be determined and discounted accordingly.

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A negative number indicates that the company may have trouble paying off its creditors, which could result in bankruptcy if cash reserves are insufficient and further financing cannot be arranged. Accrual-based accounting recognizes revenues and expenses as they are incurred regardless of whether cash flows in or out of the company at that exact time. You should use the market value of equity always because the book value is not adjusted once it is recorded in the books at the time of issue of the shares. It is common to very often see a share priced in the hundreds or thousands having a face value of $1 or $10. Hence, the book value of equity is useless for any kind of valuation, and market value is the preferred metric to use.

Goodwill is the subtraction of a company’s book value from its equity purchase price. It signifies the value over the “fair market value” of the seller that the buyer has paid. The formula for enterprise value is the market value of equity + debt + preferred stock + minority interest – cash. EV/EBITThe EV to EBIT ratio is an important valuation metric that determines whether a company’s stock is expensive or cheap in comparison to the broader market or a competitor. This is when you use future cash flow, or what the company will make in the upcoming years, to determine what the company is worth now. LiquidationLiquidation is the process of winding up a business or a segment of the business by selling off its assets.

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A leverage ratio is one of numerous financial metrics used to evaluate a company’s capacity to satisfy its financial commitments. A leverage ratio may also be used to estimate how changes in output will influence operating income by measuring a company’s mix of operating costs. The current price or worth of an object is known as fair value. More specifically, it is the amount for which the object might be sold that is both fair to the buyer and to the seller. Fair value does not refer to items being sold in dissolution; rather, it relates to items being sold in regular, fair circumstances.

Ace the Investment Banking Interview Financial Statements Question

Mergers and acquisitions (M&A) refers to the consolidation of companies or assets through various types of financial transactions. The weighted average cost of capital calculates a firm’s cost of capital, proportionately weighing each category of capital. Since the acquirer in a merger would assume the debt and other financial positions of the target, EV captures the full comprehensive value of the corporation. Furthermore, EBITDA is used in the calculation rather than just earnings for similar reasons.

Mergers & Acquisitions M&a

If the answer is “no”, you’ll need to explain it or you run the risk of being dishonest or over-confident. You might also want to learn about the firm’s current issue but there is no need to talk about it unless the topic comes up . Yet another aspiration-related Ace the Investment Banking Interview Financial Statements Question question, but for this one you should focus the answer on your passion. This is essentially the same question but with a negative tone . In addition to putting in the relevant keywords, do remember to end the answer with a positive spin.

  • You can link this with one of the key experiences you want to highlight because it should be something you are proud of.
  • There are lots of ways to ask this type of accounting question , but once you have a thorough understanding of how each line item is calculated and relates to each other, you will ace these questions.
  • However, because of how few resources are out there on what restructuring really is, a large amount of interviewees have no idea what they’re getting themselves into.
  • The rigor of valuation questions asked is also a function of your academic and professional backgrounds.
  • As a fresher in this field, I am sure you may have had questions about what and how to prepare for your first step in this finance world.

For many, the idea of reaching out to complete strangers over the internet requesting their time and attention can feel a bit uncomfortable. All of this requires assumptions of the business forecast, the debt available to finance the purchase, the interest and debt payback terms, the sale value at the end of owning the business, and the return required by the investor. Questions about LBOs are a little less common in summer internship interviews. But while it’s a more complex valuation technique, once you understand the DCF, it will be easy to understand how an LBO works just in case it comes up. Typically, all you need to have for interviews is a basic understanding of how the analysis works. You might hear a question like, “What would you do if a business has negative EBITDA?” Just consider EV / Revenue .

Additionally, there are lots of free resources online that provide a more in-depth look at these concepts. We like the free definitions provided by Investopedia and the free concept descriptions and sample models provided by Macabacus.

Ace the Investment Banking Interview Financial Statements Question

Enterprise Value is the value of an entire firm, both debt, and equity. This is the price that would be paid for the company in the event of acquisition without a premium. This interview guide consists of 16 sections which cater to various phases of the interview process. The following free WSO IB interview guide is a comprehensive tool designed to cover every single aspect of the interview process, guiding you from the very beginning to the very end.

Read it over, perfect your entry and learn how to leave a lasting impression on your interviewer from the get-go. Free Financial Modeling Guide A Complete Guide to Financial Modeling This resource is designed to be the best free guide to financial modeling! Repurchase of shares reduces the number of shares outstanding which increases EPS.

Common Issues

With the aim of building networks for candidates, Investment Banks usually organize a networking event prior to on-site/main interview day. The networking event is literally a dinner / a refreshment with the participation of candidates and Investment Banking senior levels in the firm . This question is one of the most important questions to get right in an interview. Investment Banking Analysts at Goldman Sachs can not only work as a advisors to corporations, but a few lucky ones may also get to put on their investor hats and invest in a company, private equity style.

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This module will show you how to get the most out of the Interview Guide with limited time, and what to focus on if you have only a few hours or a few days to prepare. Our unique exam prep process combines engaging teachers with best-in-class study materials. The adjusted rate of return is usually denoted as a number or rating. This is used as a risk calculation to tell how a bond yield will respond to interest rate changes. Convexity is a more accurate measure of the relationship between yield and bond price changes in interest rates. Negotiate the price and other key terms of the purchase agreement.

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