Behavioral & Fit
Tell me about yourself.
A 60–90 second story, not a line-by-line recap: background → key experiences (and why you made each move) → what drew you to banking → why you're in this room today. Practice until it sounds natural, not memorized.
Name the three financial statements and what each one shows.
Income statement: revenue, expenses, and net income over a period.
Balance sheet: assets, liabilities, and equity at a point in time (Assets = Liabilities + Equity).
Cash flow statement: cash in and out from operating, investing, and financing activities.
What are the three main valuation methodologies?
Comparable companies (trading comps), precedent transactions, and discounted cash flow (DCF) analysis. An LBO analysis is often added as a fourth to show what a financial sponsor could pay.
Walk me through the Sell-Side M&A Process
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A company's revenue grew from $80M to $100M. What's the growth rate?
25% ($20M ÷ $80M). Bonus: falling back from $100M to $80M is only a 20% decline.
Why investment banking?
Specific, personal reasons tied to real experience: the steep learning curve, live deal exposure, client-facing work alongside senior bankers, and how it builds toward your long-term goals. Anchor it in a moment that confirmed your interest (e.g., an internship deal). Red flags: money, prestige, or “I just like finance.”
How are the three financial statements linked?
Net income from the income statement is the top line of the cash flow statement and flows into retained earnings on the balance sheet. The CFS adjusts net income for non-cash items (like D&A) and balance sheet changes (working capital, capex, debt, equity); ending cash becomes the cash balance on the balance sheet.
What's the difference between enterprise value and equity value?
Equity value is the value of the company to common shareholders (share price × diluted shares outstanding). Enterprise value is the value of the core business to all capital providers: equity value + debt + preferred stock + noncontrolling interest − cash.
What makes a company a good LBO candidate?
Stable, predictable cash flows to service debt; low capex and working capital needs; a strong market position; low existing leverage; room for cost cuts or operational improvements; a solid management team; and a clear exit path (sale to a strategic, another sponsor, or IPO).
Using the Rule of 72, roughly how long does it take an investment to double at a 9% annual return?
About 8 years (72 ÷ 9 = 8).
Why our firm over the other banks you're recruiting for?
Show real research: name people you've spoken with and what stood out, reference specific recent deals or groups, and explain what sets the platform apart (sector focus, deal size, lean teams that give analysts more responsibility). Generic answers like “great culture and a strong brand” fall flat.
Depreciation increases by $10. Walk me through the three statements (40% tax rate).
IS: Operating income down $10; net income down $6 (taxes fall $4).
CFS: Net income down $6, add back $10 of non-cash depreciation → cash up $4.
BS: Cash up $4, PP&E down $10 → assets down $6. Retained earnings down $6 → equity down $6. Balances.
Walk me through a DCF.
1) Project unlevered free cash flow for 5–10 years: EBIT × (1 − tax rate) + D&A − capex − increase in NWC.
2) Calculate terminal value (perpetuity growth or exit multiple method).
3) Discount the cash flows and terminal value back at WACC → enterprise value.
4) Subtract net debt → equity value; divide by diluted shares → implied share price.
Walk me through a basic LBO.
1) Set the purchase price (entry multiple × EBITDA) and sources & uses: debt + sponsor equity.
2) Project financials and free cash flow over ~5 years.
3) Use free cash flow to pay down debt.
4) Exit at an assumed multiple of final-year EBITDA; subtract remaining net debt → exit equity value.
5) Calculate the sponsor's IRR and MOIC.
A company has $40M of EBITDA and trades at 8x EV/EBITDA. It has $100M of debt and $20M of cash. What's its equity value?
Tell me about a time you made a mistake. How did you handle it?
Use STAR with a real mistake (not a humblebrag): what happened, how you owned it and flagged it quickly, how you fixed it, and the process you changed so it won't happen again (e.g., now tying out every number before a deliverable goes out).
How does buying a building impact the three financial statements?
IS: Initially, there'll be no impact on the income statement since the purchase of the building is capitalized.
CFS: The PP&E outflow is reflected in the cash from investing section and reduces the cash balance.
BS: The cash balance will go down by the purchase price of the building, with the offsetting entry to the
cash reduction being the increase in PP&E.
IS: The PP&E outflow is reflected in the cash from investing section and reduces the cash balance.
BS: The cash balance will go down by the purchase price of the building, with the offsetting entry to the
cash reduction being the increase in PP&E.
Throughout the purchased building's useful life,
How do you calculate WACC, and why do you unlever and relever beta?
WACC = (E/V × cost of equity) + (D/V × cost of debt × (1 − tax rate)), plus preferred if any. Cost of equity comes from CAPM: risk-free rate + beta × equity risk premium.
You unlever comps' betas to strip out each company's leverage, take the median, then relever it at the target's own capital structure.
What makes a deal accretive or dilutive, and how can you quickly tell in an all-stock deal?
Accretive = the buyer's pro forma EPS goes up after the deal; dilutive = it goes down. All-stock shortcut: if the buyer's P/E is higher than the P/E it's paying for the target, the deal is accretive, because it's using “expensive” stock to buy “cheaper” earnings (before synergies and fees).
How many times in a 24-hour day do the hour and minute hands of a clock overlap?
22 times. The hands overlap every ~65.5 minutes (12/11 of an hour), so 11 times every 12 hours. It's not 24 because between 11:00 and 1:00 they only overlap once, at 12:00.
Walk me through a recent M&A deal you've followed. Was it a good deal?
Cover the buyer and target, price and valuation (EV and multiple, e.g., 12x EBITDA), strategic rationale and synergies, how it was financed (cash, stock, debt), and your own view: did the buyer overpay, and what are the key risks? Bonus points for knowing who advised each side.
What is a deferred tax liability (DTL), and what commonly creates one?
A DTL arises when book (GAAP) tax expense is higher than the cash taxes a company actually pays today, so it will owe more tax in the future when the difference reverses. Most common cause: accelerated depreciation for tax purposes vs. straight-line for book. Asset write-ups in M&A stock deals also create DTLs.
Can enterprise value be negative? What about equity value?
EV can be negative if a company's cash exceeds its equity value plus debt, which happens with cash-rich companies the market expects to burn through their cash (or deeply out-of-favor stocks). Equity value (market cap) can't be negative since a share price can't fall below zero, though book shareholders' equity can be.
Why would a buyer prefer an asset purchase over a stock purchase, and why would the seller push back?
Buyers like asset deals: they get a step-up in the assets' tax basis (more tax-deductible D&A, including 15-year goodwill amortization) and can leave unwanted liabilities behind. Sellers prefer stock deals: a clean exit with all liabilities transferring, and C-corp sellers avoid double taxation. A 338(h)(10) election can bridge the gap.
You possess a 7 kg gold bar and plan to give 1 kg of gold daily for seven days. You can only make two cuts in the bar. What is the method to achieve this?
To distribute a 7 kg gold bar over seven days with only two cuts, first cut the bar into pieces of 1 kg, 2 kg, and 4 kg. Then, distribute the gold in this sequence: Day 1: give 1 kg, Day 2: exchange it for 2 kg (2 - 1 = 1), Day 3: give 1 kg, Day 4: exchange 4 kg for the 1 kg and 2 kg (4 - 2 -1 = 1), Day 5: give 1 kg, Day 6: exchange it for 2 kg (2 - 1 = 1), Day 7: give 1 kg.