IB Interview Question Bank

Walk me through the three financial statements.

How do the three financial statements link together?

What happens to the three financial statements when depreciation increases by $10?

What is working capital and why does it matter?

What is the difference between cash-based and accrual-based accounting?

A company prepays $12M in rent for a building. Walk me through the impact on all three statements over the first and second years (straight-line, $6M/year).

What is goodwill and how is it created?

What is the difference between accounts receivable and deferred revenue?

What are the main valuation methodologies used in investment banking?

Walk me through a DCF analysis.

Why might a company trade at a higher EV/EBITDA multiple than its peers?

What is the difference between Enterprise Value and Equity Value?

How do you calculate WACC and what are the key inputs?

When would you use a Sum-of-the-Parts (SOTP) valuation and how does it work?

If a company has a net loss, which valuation multiples would you use?

Why would a company acquire another company?

Walk me through a basic merger model (accretion/dilution analysis).

What is the difference between a stock deal and an asset deal, and why does it matter?

A buyer with a P/E of 20x acquires a target with a P/E of 10x in an all-stock deal. Is this accretive or dilutive? Why?

What are synergies and how are they typically categorized?

Walk me through a leveraged buyout (LBO) at a high level.

What are the key credit metrics and debt covenants in an LBO?

A PE firm buys a company for $1 billion at 8x EBITDA ($125M EBITDA) with 60% debt. After 5 years, EBITDA grows to $175M, half the debt is repaid, and the exit multiple is 8x. What is the approximate equity return?

What makes an ideal LBO candidate?

How does the debt structure in an LBO typically look and what are the different tranches?

Why investment banking?

Tell me about a time you worked on a team to solve a difficult problem.

What is your greatest strength and how does it apply to investment banking?

Tell me about a recent deal or piece of financial news that interests you.

You discover an error in a pitch book 30 minutes before a client presentation. Your VP is unavailable. What do you do?