Summer Analyst Interview Questions

barfight:

Did you get any questions about it?

I did, but the key is to tell the person that you don't fully understand the mechanics of the model, but you got the gist of it, and you can navigate excel without a mouse.

Were you interviewing for S&T positions?

I'll take #1.

Let's model the pizzeria as we would an early-stage tech company with no earnings history. We would take the average value of a universe of other pizzerias in the immediate vicinity, and failing that, any other quick-serve restaurants. Failing that, we would take the average of any kind of business that serves circular objects, preferably hot, preferably in a box. Then we will apply a premium or discount based on "intangibles" and voila, you got yourself a nice valuation.

just value the pizzeria compared to other pizzerias in the area (comparable companies) or do an intrinsic valuation of it (DCF).. pretty simple

bump

1. Basic valuation question. You'd use DCF, Comparable companies (look at P/E ratios, EV/EVITDA), or Precedent Transactions (look at transactions from similar industry, market cap)

edit: if you want to go deeper you can also use--and this probably won't apply to a pizza parlor--LBO, Sum of the Parts, Liquidation Valuation.

2. Not 100% sure about this one. But you can raise money by debt or equity. Companies use debt if their cash flow is stable so they are not at risk of defaulting--so generally mature companies. Equity is used if a company will grow quickly (like tech companies where their P/E ratios are very high), or if they feel like their stock is highly or over valued. Debt is the cheaper option because of interest payments and companies don't have to dilute their ownership.

edit: Of course you can use a mix of debt and equity 90/10 80/20, etc.

3. Don't know.

1. DCF or comps
2. issue debt or equity based in desired cap structure

Don't let them trick you up too much with types of businesses and insignificant details.

<span class=keyword_link><a href=/finance-dictionary/what-is-the-bulge-bracket-BB><abbr title=bulge bracket&#10;>BB</abbr></a></span>.MandA.3rdyear:

i interviewed a kid and i asked him on a scale of 1-10 how do you view yourself in modeling. He said 9. I was like wow, so tell me how you would build an ability to pay analysis using VBA to find the optimal ability to pay for 10 companies in 5 scenarios all calcing off one set of numbers for each company.

So yea don't fuck with M&A people they're dicks.

i can do that w/o the vba. i assume w/the 5 scenarios you mean differeing types of payment forms (e.g. cash, debt, stock, convert issue, etc...). i would do it using sensitivity table (old fashion way) and then figure the optimal structure. how does vba come into play?

Why wouldn't the ratio decrease. Here's my rationale: if you sell an asset, assuming that that it's a cash transaction, your cash position will increase which would reduce your net debt.

If I am not mistaken you are thinking of selling a fixed asset, which if it is net cash positive would theoretically reduce leverage. In the question, the word asset means an income generating unit (i.e. subsidiary). As a result, even though you are reducing debt, when you pro forma EBITDA, which is also reduced, your leverage increases.