Commonly Asked I-Banking Interview Questions

Commonly Asked I-Banking Questions (printable)

1. Tell me about yourself. / Walk me through your resume. (by far the most important question asked)


2. Why investment banking? (the second most important question)


3. How do you get to Free Cash Flow (FCF) from EBIT (or Net Income)?


4. Once you get to FCF, then what?


5. In picking a stock, what do you typically look at?


6. If you have $1 more of depreciation, how does that flow through the income statement, balance sheet, and statement of cash flows?


7. Why finance?


8. Would you rather have $100 today or $200 four years from now?


9. What are the formulas for CAPM, WACC, and Terminal Value?


10. What is Terminal Value?


11. How do you value a company?


12. How would you value a sandwich shop on Wall Street?


13. Are markets efficient?


14. Explain accretion and dilution.


15. How do you calculate Enterprise Value?


16. What is 7 cubed (7^3)?


17. What is the square root of 3?


18. What is 16*14?


19. What is 18*18?


20. What is an asset beta and how do you calculate it?


21. If you have tow dice, both with six sides, what is the probability that when you roll both, they will sum to less than three?


22. Is it mathematically/financially possible to buy a company for $100 million, sell if for $100 million, and make $80 million? If so, how? If not, why not? (Hint: LBO)


23. How do the three major financial statements interrelate?


24. What is the difference between fundamental and technical analysis?


25. What was your SAT score?


26. What is the worst grade and received in school? Why?


27. Walk me through a Discounted Cash Flow (DCF) valuation.


28. What recent deals has our firm done?


29. What does an analyst do?


30. What is a P/E ratio?


31. What is beta and how do you calculate it?


32. What is the difference between an accurately and efficiently priced security?


33. If a bond's coupon rate is 7% and the expected return in the market is 5%, is the bond priced at a premium or a discount?


34. If interest rates rise by 1%, what would happen to stock prices? Why?


35. If you have $100 in assets and sell off $10 of those assets, what effect does it have on the three major financial statements?


36. What do you want me to know about yourself that isn't on your resume or that I haven't asked you?


37. What makes you different from the other individuals that are applying?


38. Why did you decide to go to the University of ________?


39. What is the Statement of Cash Flow?


40. What is Free Cash Flow?
The answer the interviewer is looking for is FCF is the amount of cash that debt AND equity holder's have claim to after all obligations have been met.


41. What is the difference between book and GAAP reported net income?


42. Which of the three valuation techniques (DCF, Comparable Companies, Precedent Transactions) is the best? Why?


43. What is the difference between Free Cash Flows vs. Cash Flows?


44. What are two methods of depreciation?


45. What is accumulated depreciation?


46. Which would provide more incentive to an executive, stock options or straight stock? Why?


47. What are the fixed and variable costs of a ski resort?


48. What do you expect by holding funds in an index vs. cash?


49. If our bank was to give you $50 million and you had one year to invest it, would you rather hold a one-year bond or a five-year bond? Why?


50. What differences do you perceive between the firms you are interviewing with?


51. If you and a friend start a company and have equal ownership, then take the company pubic and issue 20% equity, how much of the firm do you own?


52. What are the differences between a WACC and an asset beta?


53. What is your life goal/ambition?


54. What motivates you?


55. What will motivate you to continue working, after working 80+ hrs/week for three straight weeks?


56. How much are you motivated by greed?


57. Why not Sales & Trading, Private Equity, or Research?


58. Describe to me a team process or activity where there was a major conflict. Tell me what you did to resolve the situation?


59. On an analog clock, when it is precisely 3:15, what is the angle between the minute hand and the hour hand?


60. We all know that analysts do valuation, what else do they do?


61. What did you do in the last 24 hours?


62. Tell me a joke.