How to practice for an IB modelling test

For a 2-hour IB modeling test, especially for an intern position at an Energy Boutique, preparation is key. Based on the most helpful WSO content, here’s how you can effectively prepare:

1. Focus on Key Models

• LBO Models: These are common in boutique and private equity-related tests. Practice building a simple leveraged buyout model, including sources and uses, debt schedules, and calculating IRR.
• Merger Models: Understand accretion/dilution analysis, as this could also be tested.
• DCF Models: While you may already be familiar with discounted cash flow models, ensure you can build one efficiently from scratch.
• 3-Statement Models: Be comfortable linking the income statement, balance sheet, and cash flow statement.

2. Practice Building from Scratch

• Start with a blank Excel sheet and practice building models without templates. This will simulate the test environment and improve your speed and accuracy.
• Focus on structuring your model logically and clearly, as presentation matters.

3. Key Tips for Preparation

• Excel Proficiency: Master Excel shortcuts and formulas (e.g., INDEX-MATCH, IF statements, and conditional formatting). Resources like WSO’s Excel Modeling Best Practices can be helpful.
• Understand Debt Terms: Be prepared to input and adjust debt terms, as these are often part of LBO models.
• Time Management: Practice completing models within a 2-hour timeframe to simulate the test conditions.
• Attention to Detail: Ensure your models are error-free and formatted professionally.

4. Resources to Use

• WSO Financial Modeling Resources: These include templates, guides, and tutorials for LBO, DCF, and 3-statement models.
• WSO Bootcamps: Consider attending a Financial Modeling & Valuation Bootcamp or Private Equity Interview Bootcamp for hands-on practice.
• Free LBO Modeling Test: WSO offers a free LBO modeling test with a video solution and modeling file. This can be a great way to practice under realistic conditions.

5. Energy-Specific Preparation

• Since this is for an Energy Boutique, familiarize yourself with industry-specific metrics like production rates, reserve valuations, and commodity price sensitivities. These might be incorporated into the test.

By focusing on these areas and leveraging the resources mentioned, you’ll be well-prepared to tackle the modeling test confidently. Good luck!

Sources: 7 Tips for the Boutique IB Summer Stint, Preparation for 2 hour LBO modelling test, Real Estate Modelling Test Practice, PE Interview - Need to learn modeling in 2 days, Q&A - Infrastructure PE & IBD