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Investment Banking Interview Questions

This document contains a list of 32 questions that would be asked in an investment banking interview. The questions cover a wide range of topics including: - Calculating cost of equity and debt - Deferred taxes and how they arise - Differences between enterprise value, equity value, and shareholders' equity - Calculating beta and how it is used - Terminal value and discounted cash flow valuation - Financial ratios for evaluating company performance - Differences between mergers, acquisitions, and leveraged buyouts - Appropriate statements and metrics for reviewing a company's overall health - Methods for valuing companies using intrinsic value and relative valuation approaches

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Raviteja Sirivela
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156 views1 page

Investment Banking Interview Questions

This document contains a list of 32 questions that would be asked in an investment banking interview. The questions cover a wide range of topics including: - Calculating cost of equity and debt - Deferred taxes and how they arise - Differences between enterprise value, equity value, and shareholders' equity - Calculating beta and how it is used - Terminal value and discounted cash flow valuation - Financial ratios for evaluating company performance - Differences between mergers, acquisitions, and leveraged buyouts - Appropriate statements and metrics for reviewing a company's overall health - Methods for valuing companies using intrinsic value and relative valuation approaches

Uploaded by

Raviteja Sirivela
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Preparing for Investment Banking Interview

1. What is cheaper - debt or equity? Justify your answer.


2. How is cost of equity and cost of debt calculated?
3. What do you understand by deferred Taxes and how do they arise?
4. If you have with you Enterprise value and equity value both of a company, what would
you pay more attention and why?
5. Can a Company have negative Enterprise value and negative Equity value? If yes how.
6. Is shareholder's equity and equity value the same thing? If not what's the difference.
7. What is generally used as a discount rate? And how that rate is calculated?
8. Why do we have to un-lever and re-lever beta?
9. Which company would have a higher beta : A manufacturing company or a technology
company?
10. What do you understand by terminal value?
11. How can you calculate cost of equity eithout CAPM model?
12. Differenciate between merger and acquisition.
13. How will you differenciate Goodwill and other intangible asset
14. Define Synergy
15. Which method would company use to buy other company - cash, stock or debt. Assuming
all else are equal.
16. What is leveraged Buyout?
17. If you had to review only one statement then which you you use to review overall health
of a company?
18. Name key Financial Ratios for appraisal and evaluation
19. What is the difference between accounts receivable and deferred revenue?
20. Why is goodwill impaired?
21. Differenciate LIFO and FIFO.
22. A company has had positive EBITDA for the past 10 years, but it recently went bankrupt.
How could this happen?
23. How long usually it take to collect accounts receivable?
24. What is indicated by negative working capital?
25. Why is income statement not affected by changes in inventory?
26. Depreciation being non-cash expense how can affect cash balance.
27.What are the benefits of a company getting listed on an exchange?
28. How do you value a Company?
This question, or variations of it, should be answered by talking about 2 primary valuation
methodologies: Intrinsic Value (discounted cash flow valuation), and Relative Valuation
29. What is the appropriate discount rate to use in an unlevered DCF analysis
30. How would you calculate beta for a company?
31. How do you calculate unlevered free cash flows for DCF analysis?
Free cash flows = Operating profit (EBIT) * (1 –tax rate) + depreciation & amortization –
changes in net working capital – capital expenditures
32.Two companies are identical in earnings, growth prospects, leverage, returns on capital,
and risk. Company A is trading at a 15 P/E multiple, while the other trades at 10 P/E. which
would you prefer as an investment?

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