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What are some of the more technical questions I can expect during the finance interview? I have heard from many people to expect how to valuate companies, etc. Should I start describing formulas verbally or should I bust out my drawing skills?

Comments (43)

  • FreeCashFool's picture

    you can expect an array of accounting questions... remember, accounting is more key to this job than finance

    the lay-up tech question asked at almost every interview is: how does depreciation flow through the sheets? so you just want to go through and verbally explain what the effect is of a depreciation charge on each of the sheets and compare it to a "status quo" scenario where there is no dep'n

    another common, like you said, is how do i value a company. you already know a few, so just talk about it high-level... "well there are a variety of ways to value a company, three of which are commonly used:
    1) comparable company analysis - where you'll take multiples of comparable companies and compare them to your own... for example P/E, EV/EBITDA, EV/Sales... if you want, you can explain why you use Enterprise Value instead of Equity or Market Cap
    2) comparable transaction analysis - where you'll compare deals in the industry similar to your own and explore the metrics/valuation used for the target and see how that compares to your own company
    3) discounted cash flow - essentially every company is worthless without cash as a going conern yada yada, so we can discount a company's future cash flow by taking its weighted average cost of capital (which they may ask about in more detail).. and discount them to the present value... also talk about exit multiples and terminal values (perpetuity growth rates, etc)

    those are the two most basic ones... accounting questions i've been asked:
    -minority interest
    -deferred tax assets/liab
    -lifo/fifo
    -how are 3 statements linked

    obviously, if you have no background in acct / fin, they'll take that into account, but you should have a basic understanding

  • PE Chimp's picture

    What are some of the more bizarre questions that one can face in an interview for an analyst position? Also, does anyone have comments on the brainteaser questions, what is the best way to answer these sorts of questions?

  • In reply to PE Chimp
    ZiggyMon's picture

    I heard that in a lot of cases they recruit engineers who probably don't have any finance background (since the engieers are marketing their quantative skills to the employers).

    What kind of questions would they ask such candidates since they don't really have any accounting background?

  • In reply to ZiggyMon
    nychimp's picture

    they'll focus more on WHY you want to do banking and whether they think you're a fit. they may question your desire if you've taken no finance or accounting classes if they've been available to you. otherwise, get some story together how you are intrigued by markest and the financial world, how a deal is finanaced, how a merger or spin-off is done. There is an incredible amount to learn but you love throwing yourself int things "head-first". You know your learning curve will be steep, but that is how you like it., etc etc

  • In reply to FreeCashFool
    • ?
    • (Chimp, 0 )
    •  on 7/27/06 at 11:28am
    Anonymous Monkey's picture

    To FreeCashFool,

    Are those all things one should know going into an undergrad BB internship interview, and where is a good place/book to learn all of that stuff? I will have just started taking an intro to finance class one-month prior to my interview so I would like to prepare as much this summer. Thanks!

  • In reply to
    FreeCashFool's picture

    you have a BB internship interview during the fall? my experience was that the BB's only recruit for interns during the spring around feb-march or so... you can use some of your free time over winter break to prepare for those

    at any rate, if you have no background, you should have a basic understanding at the least... you can pick up the Vault Guide to Finance Interviews, as it breaks things down pretty well (although it's not as comprehensive as you might like)

    with accounting you should just understand the basics... hopefully you'll have taken an intro accounting class by then, but the finance guide will also mention some basic accounting. it seems like you don't have that strong of a background in either so i wouldn't sweat it if you can learn the fundamentals from your finance course... and pick up an accounting textbook and go through it if you can

    with regards to strange interview questions, you can expect a number of brainteasers / trick questions / mental math q's... the purpose of these is to see how you think, not that you get the right answer. so think out loud, show them your logic, you should be good... the brainteasers / guesstimates are, however, rarer in banking than in consulting

  • In reply to FreeCashFool
    • ?
    • (Chimp, 0 )
    •  on 7/28/06 at 8:44am
    Anonymous Monkey's picture

    You have a 10x10x10 cube made up of 1x1x1 small cubes. You paint the outside of it. How many cubes have paint on them?

    Don't use a calculator.

  • In reply to
    anonrock's picture
  • In reply to anonrock
    • ?
    • (Chimp, 0 )
    •  on 7/28/06 at 9:31am
    Anonymous Monkey's picture

    488 because the edges are on 2 sides and the corners are on 3

  • In reply to PE Chimp
    GameTheory's picture

    Strip away any cubes with overlapping sides.

    8x8=64x6sides=384

    Add in the cubes which border two sides (the edges).

    8x12edges=96

    Add in cubes which border 3 sides (the corners).

    8

  • In reply to GameTheory
    • ?
    • (Chimp, 0 )
    •  on 7/28/06 at 11:34am
    Anonymous Monkey's picture

    the simplest way is to think of which cubs are NOT painted. It would be an 8x8x8 cube inside. That's512 right there, so 488 must be painted. GameTheory's strategy is how I originally did it though.

  • In reply to
    Dawgie's picture

    I'm not very good with this stuff, how come it wouldn't be 9x9x9 cubes not painted?
    It's a dawg eat dawg world.

    It's a dawg eat dawg world.

  • In reply to Dawgie
    • ?
    • (Chimp, 0 )
    •  on 7/28/06 at 11:41am
    Anonymous Monkey's picture

    because remmeber it's on both sides. you have a 1 cube border on each side. it's easy to get tripped up I agree.

  • In reply to
    • ?
    • (Chimp, 0 )
    •  on 7/28/06 at 1:20pm
    Anonymous Monkey's picture

    you have 6 marbles that look the same but 1 is heavier. You also have a two sided scale. What is the fastest way to identify the heaviest marble and how?

  • In reply to
    PE Chimp's picture

    Weigh 4 marbles. If the scale is balanced then weigh the other two that were off the scale to find the heaviest. If not, weigh the two marbles that were on the heavier side of the scale to find the heaviest marble. Is that right?

  • In reply to
    • ?
    • (Chimp, 0 )
    •  on 7/28/06 at 1:31pm
    Anonymous Monkey's picture

    This is probably not the fastest way, but it's my initial thought. Seperate them into groups of 3 and see which group is heavier. That eliminates 3. Then take the remaining 3 and measure 1 against the other until you find a heavier one.

    with this method you'd know the answer in as little as 2 measurements or as many as 4.

    but i'd be interested to hear the correct solution.

  • PE Chimp's picture

    It's 3:15 - what's the angle between the hands on the clock?

    You have a 3 liter jug, a 5 liter jug and a continuously running hose. Using those 3 things, how do you get exactly 4 liters in the 5 liter jug?

  • In reply to
    • ?
    • (Chimp, 0 )
    •  on 7/28/06 at 1:33pm
    Anonymous Monkey's picture

    ok scratch that, PE chimp's is better, it's guaranteed in 2 measurements

  • In reply to PE Chimp
    • ?
    • (Chimp, 0 )
    •  on 7/28/06 at 1:34pm
    Anonymous Monkey's picture

    these are right out of vault finance interviews guide. just pick a copy up

  • In reply to PE Chimp
    Dawgie's picture

    These suck I don't know how to do any of these, should I not try to become an I-Banker? (Serious question)
    It's a dawg eat dawg world.

    It's a dawg eat dawg world.

  • In reply to PE Chimp
    FreeCashFool's picture

    3:15:
    if the hour hand doesn't move, it's 0 degrees, but because it does, it moves 15/60 (or 1/4) of 360/12 degrees so it's 30/4 so 7.25 degrees

    jugs:
    fill up the 5 liter, pour into 3-liter, you've got 2 liters left over
    pour the 2 liters into the 3 liter
    fill up 5 liter again, pour what you can into 3 liter (1-liter)
    5 liters - 1 liter = 4 liters

    these aren't skills necessary for banking, they're just to test your thought process... think out loud, and you'll be okay. they'll use these to throw you off your game too, so just be calm and poised... they'll also ask mental math q's that should be relatively easy
    (e.g. 5^5 or 12*24)...

  • In reply to PE Chimp
    Ratgoo's picture

    0 degrees.

    fill 3 liter, empty into 5 liter, fill 3 liter again, fill into 5 liter, the 3 liter will have 1 liter left, empty 5 liter, empty the reaming 1 liter from the 3 liter into the 5 liter, fill the 3 liter, empty into the 5 liter and the 5 liter will contain 4 liters.

    or you can figure out the rate at which water is emptying out of the hose, if it's constant function, take an integral.

    or, take the dimensions of the 5 liter jug, assuming it's a cylindrical shape, the volume fct will be 5 = PI*(radius sqaured)*height, given the radius and volume solve for height, mark off at which height the jug will contain 4 liters.

  • In reply to FreeCashFool
    Dawgie's picture

    I don't know how to do those math's in my head, am I doomed?
    It's a dawg eat dawg world.

    It's a dawg eat dawg world.

  • In reply to
    • ?
    • (Chimp, 0 )
    •  on 7/28/06 at 2:25pm
    Anonymous Monkey's picture

    Do you get to use a pencil and scratch paper for any of the questions?

  • In reply to
    FreeCashFool's picture

    or we can assume it's a sphere and take 4/3 pi r^3 right?

    and the hour hand moves

    hysterical!

  • In reply to FreeCashFool
    Dawgie's picture

    Math makes my head hurt!
    It's a dawg eat dawg world.

    It's a dawg eat dawg world.

  • In reply to patents555
    sylvester's picture

    The math questions are fairly simple. I was wondering if they ever give physics questions or some that would require more geography knowledge (like the time zones questions) etc.

  • In reply to Craven Moorehead
    finengineer's picture

    would the interviewer just sit there an look at you until you come up with the answer? or are you supposed to have an amazing split second reaction? What if you get nervous and botch up an easy question?

  • In reply to Craven Moorehead
    FreeCashFool's picture

    you're right. my mistake.. that lack of attention to detail will get you cut

    seriously, though, to reiterate: the point is to see how you think. you need to do the work out loud and build out the solution... so don't make the interviewer sit there and watch you as you silently think about how you're never going to get a job.

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