Investment Banking Interview Questions - 15 Answers to Land the Job

Patrick Curtis

Reviewed by

Patrick Curtis

Expertise: Private Equity | Investment Banking

Updated:

January 24, 2022

ADMIN NOTE:  New incredible resource released by WSO focused on investment banking interviews with over 100 sample questions and answers.

 

I was in your shoes about five or six years ago. I worked as an investment banking analyst at a Moelis/Houlihan/Evercore type firm in restructuring, got an offer for direct promotion to associate, passed on that to go to grad school in Europe, and have recently returned to take my associate perch in the same group. Take my word for whatever you will.

I drill my analyst interview candidates hard on technicals. Not obscure things, I just test how well they know the basics, how they think about things, and if they can apply and think on their feet a bit.

Here's a five-step plan in getting you prepared from top to bottom:

Investment Banking Interview Steps

Investment Banking Interview - The 1st Impression

  1. The Entrance
  • A simple “Nice to meet you. Thank you guys for taking the time,” is a great hello.
  • Don’t flub the handshake. Stay standing until I sit down.
  • Don’t come on too strong/overenthusiastic or I’ll think I will be annoyed with you the first week on the job. Sit up in your chair. Don’t wear weird socks. Fake smiles/laughs are a no-no. A quick joke is a gamble – it could be a plus, or I could just think you’re silly.

 

  1. How to Carry Yourself
  • The biggest thing I am looking for is humble confidence - someone I would like to have a beer with.
  • Be punchy, brief, and learn how to end a sentence. I can’t tell you how many times people have gotten into trouble by rambling off into some ass-backward irrelevant tangent. Learn to be comfortable with a little silence here and there while we absorb your answer.
  • Listen, listen, listen!!! So many mistakes come from just not listening carefully and not being in the moment.

 

 

 

 

 

 

Investment Banking Fit Questions (And Answers)

You've reached the interview. This means that the firm believes you are smart enough for the job. At this point, the little things matter. Fit questions are a major part of the IB analyst interview. The focus of fit questions is to see who you are and how you would fit into the firm's culture.

  1. Walk Me Through Your Background/Resume

    Dial-in a cohesive 90 second resume walkthrough that focuses on the positive motivating factors behind every transition (school to job, job to better job, most recent job to grad school). E.g.

    "I went to school to design cars, but after one internship I realized I liked interacting with clients directly and pursued full-time roles with a sales bent. In that role, I develop solid sales skills as well as gaining exposure to a, b, and c. I wanted to continue honing those and branch out to focus on x, y, and z. I sought a new role/promotion which provided that opportunity..."
    Be deliberate. Every move you made should have a reason (preferably that you initiated). Don't be negative. Never say you left because you were bored or "wanted to try something new."

     

  2. Why Investment Banking?

    Here's a complete guide to answering the "why investment banking" question. The reality is you need to tailor the question to yourself. It varies with your background, how substantive you want to get, and what follow-up questions you want the interviewer to ask. No matter what, the answer here should be well rehearsed as well as the scenarios that could follow.

     

  3. "Tell me about a time when...

    Ideally, you can come up with 6-8 stories that cover the 30-40 basic questions, with only slight modifications. Don't wing it. For every potential question, map out the story using the SOAR framework. Describe the Situation (10-15 seconds), Obstacle (10-15s), Action (60-75s), and Result (15-30s). Stories for these questions should be 1.5-2 minutes long and focus only on what's important.

 

Technical Questions

  1. What are the Three Main Financial Statements?

    The three main financial statements are the Income Statement, the Balance Sheet, and the Statement of Cash Flows. The Income Statement shows a company’s revenues, costs, and expenses, which together yield net income. The Balance Sheet shows a company’s assets, liabilities, and equity. The Cash Flow Statement starts with net income from the Income Statement; then it shows adjustments for non-cash expenses, non-expense purchases such as capital expenditures, changes in working capital, or debt repayment and issuance to calculate the company’s ending cash balance.

     

  2. If you Could Use Only One Financial Statement to Evaluate the Financial State of a Company, Which Would You Choose?

    Sample Answer:

    I would want to see the Cash Flow Statement so I could see the actual liquidity position of the business and how much cash it is using and generating. The Income Statement can be misleading due to any number of non-cash expenses that may not truly be affecting the overall business. And the Balance Sheet alone just shows a snapshot of the Company at one point in time, without showing how operations are actually performing.

     

  3. How would a $10 increase in depreciation expense affect the three financial statements?

     

     

  4. What is WACC and how do you calculate it?

     

    WACC is the acronym for Weighted Average Cost of Capital. It is used as the discount rate in a discounted cash flow analysis to calculate the present value of a company’s cash flows and terminal value. It reflects the overall cost of a company raising new capital, which is also a representation of the riskiness of investment in the company.

     

  5. Why would a company issue equity rather than debt to fund its operations?
    • If the company feels its stock price is inflated they can raise a large amount of capital compared to the percentage of ownership sold
    • If the projects the company plans to invest in with proceeds may not produce immediate or consistent cash flows to pay debt
    • If the company wants to adjust cap structure or pay down debt
    • If the owners of the company want to sell off a portion of their ownership

     

  6. How/Why do you lever or unlever beta?

    Unlevering beta allows one to remove the debt effect in the capital structure. This will show you the risk of a firm's equity compared to the market. Also, if you are trying to do a market comparison with a company that's not on the market (so no beta), you can take a comparable company and unlever its beta as a proxy for the unlisted company's beta.

     

  7. What are some ways you can value a company?

    Comparable Companies/Multiples Analysis: Most often an analyst will take the average multiple from comparable companies (based on size, industry, etc) and use that multiple with the operating metric of the company being valued.

    Market Valuation / Market Capitalization: The market value of equity is used only for publicly traded companies. It is calculated by multiplying the number of shares outstanding by the current stock price.

    Discounted Cash Flow Analysis: The sum of the present values of all those cash flows is the estimated present Enterprise Value of the from according to a discounted cash flow model.

  8. Which of the valuation methodologies will result in the highest valuation? highest valuation methodology

     

  9. Name major factors that drive M&A activity (mergers and acquisitions)?
    • Create synergies and save on costs
    • Acquire new tech or product pipelines
    • Grow share in the market by removing a competitor
    • Buying a supplier or distributor to increase supply chain pricing power
    • Improve financial metrics and numbers
  10. General Things to Remember

    Walk me through every calculation you are doing. I want to hear you think out loud. The process matters far more than your answer and gives you a chance to demonstrate a grip on the concepts. I sometimes just ask of a simple calculation, “Are you sure?” to put on a little pressure and see how you respond. I am looking here for you to take five seconds, double-check your math, and answer with a confident, “Yes, I am sure.”

    Don’t be afraid to say, “I don’t know” to a tough technical. As an analyst, I expect you to ALWAYS tell me when you don’t know something, and never BS an answer. If you give an, “I don’t know” follow it with, “But here is what I am thinking. Tell me if I am on the right track.” And walk me through your thoughts. This is a great analyst quality because it shows that you’ll think about a problem critically before you call me and ask about it.

See the below link for more detailed technical interview questions and answers in finance:

 

Finance Technical Q&A

 

'Pitch Me A Stock'

Many interviewers will ask you in one way or another to pitch a stock if you have any experience with trading, a private wealth management internship, a hedge fund internship, really anything that deals with market transactions. If this is you, spend 30 minutes to a couple of hours finding a stock you like and why. Even if it doesn't, better safe than sorry. Here's a good explanation for this question provided by user @BankerC159".

You have to follow the market a little bit but I think the underlying concept they are trying to get out of you is if you actually know what drives a business. What are the key drivers of the business (both revenue and cost)? Why is it a good investment? What are the potential opportunities available? What's their competitive advantage? Etc.

For more details and many examples on how to pitch a stock, you should also check out the WSO Hedge Fund Interview Course.

 

Investment Banking Interview - Wrapping Up

  • Before you ask us questions, it’s nice to say “I’ve done lots of research on your firm and talked to a lot of people, so I know your firm pretty well. I really want to hear more about your own personal experiences here.”
  • Some good questions to ask your interviewers: 1) Tell me about a recent deal you’ve worked on that you liked. 2) What are the next steps from here? 3) How have you liked your experience here so far? Anything surprise you, good or bad? 4) Tell me about what you guys do for fun.
  • Some questions to avoid: 1) What are the hours like here? (Get that info later from an insider that you know better.) 2) Anything related to compensation. 3) What are your plans after banking? (We can’t answer that, and we’ll all say we’re planning on staying in the near term…duh…)
  • Don’t stand up until I stand up.

Questions, disagreements, comments? Fire away. As always, if you like it, put a banana on it. Silly enough, it actually encourages me to write more. (Bravo, Patrick and Andy. Bravo!)

 

IB Interview Course with 7,548 Questions

The fact of the matter is you won't improve unless you practice. While this guide is a great starting point, you need to get real questions and answer them as a simulation for interviews. The WSO investment banking interview course is designed by countless professionals with real-world experience, tailored to people aspiring to break into the industry.

IB Interview Course Here

Patrick Curtis is a member of WSO Editorial Board which helps ensure the accuracy of content across top articles on Wall Street Oasis. Prior to becoming our CEO & Founder at Wall Street Oasis, Patrick spent three years as a Private Equity... This content was originally created by member frgna and has evolved with the help of our investment banking mentors.

 
Cookies With Milken:

I came here because the thread appeared on the side bar as "How to nail an investment banking analyst."

Sorry for the psyche-out...mods can you retitle to something that works?

if you like it then you shoulda put a banana on it
 

As someone looking to break in to an analyst role, this is chock-full of good advice. It isn't anything revolutionary, but it is a nice consolidated look at the fundamentals of the interview process. Someone else posted this link recently, but for an answer to the technicals the following is pretty solid: http://www.ibankingfaq.com/ Thanks for the post, frgna

 

This is gold , but

frgna:

6. Walk through the resume in 1 minute or less - I know you've had an interesting life but I don't need to hear about it now - maybe we come back to it at the end of the interview

Don't they usually say 3-5 minutes?

 
Arsene Wenger's Father:

This is gold , but

frgna:

6. Walk through the resume in 1 minute or less - I know you've had an interesting life but I don't need to hear about it now - maybe we come back to it at the end of the interview

Don't they usually say 3-5 minutes?

There's not a hard and fast rule - if you think you have an interesting story and its worth telling - just go and tell it. Now don't drone on while an interviewer clearly shows signs of no longer being interested, but for fucks sake if you've got to say something that's important to winning a 'gig then say it. For the record, my story can be as long or as short as the interviewers body language is allowing me.

'Before you enter... be willing to pay the price'
 
BepBep12:
Arsene Wenger's Father:

This is gold , but

frgna:

6. Walk through the resume in 1 minute or less - I know you've had an interesting life but I don't need to hear about it now - maybe we come back to it at the end of the interview

Don't they usually say 3-5 minutes?

There's not a hard and fast rule - if you think you have an interesting story and its worth telling - just go and tell it. Now don't drone on while an interviewer clearly shows signs of no longer being interested, but for fucks sake if you've got to say something that's important to winning a 'gig then say it. For the record, my story can be as long or as short as the interviewers body language is allowing me.

Yes, not a hard and fast - depends if it is a technical or a fit interview. This is great advice to read the body language. At 21-22 the story shouldn't take an awful long time, and remember that if there are a lot of loops you don't have to share every loop - only those that will help win the job as another poster mentioned.

if you like it then you shoulda put a banana on it
 

Wow this list is great. I think college students tend to read many of these threads and forget half of their wisdoms when it comes to the interviews. But I urge every prospective kid to take every one of these points and own them, perfect them. I would suggest printing this list and referencing it after every mock interview to see how closely you kept to it

 
NYKnicks92:

Wow this list is great. I think college students tend to read many of these threads and forget half of their wisdoms when it comes to the interviews. But I urge every prospective kid to take every one of these points and own them, perfect them. I would suggest printing this list and referencing it after every mock interview to see how closely you kept to it

Yes yes yes - absolutely. Had a few w PE internship experience who couldn't explain the sources of return on an LBO. Shows a complete lack of interest/engagement in what you were doing. Even if you didn't have substantial "real work" I would have expected you to read a few wikipedia articles on LBOs.

PS they are: leverage (lower cost of capital/paying down debt over time), multiple expansion, and operational improvements (e.g. revenue synergies and cost cutting).

if you like it then you shoulda put a banana on it
 

Lots of good advice in this thread. Also, don't overestimate your competition. You'd be surprised how many candidates from top 15 schools and "Investment banking" or "private equity" experience on their resume cannot walk through how the 3 financial statements connect. Know all the technicals cold and be confident. Those two things alone put you ahead of the game.

 

Thanks for the comments guys, hope this makes it into at least a few good hands in time for super saturdays. Anyone who uses this stuff, curious to hear how your interviews go.

if you like it then you shoulda put a banana on it
 
frgna:

Thanks for the comments guys, hope this makes it into at least a few good hands in time for super saturdays. Anyone who uses this stuff, curious to hear how your interviews go.

I read your post Friday night, right before my super day at a MM shop. I definitely used some of the advice and was extended the offer for FT. Thanks a lot!I

 
kedwards33:
frgna:

Thanks for the comments guys, hope this makes it into at least a few good hands in time for super saturdays. Anyone who uses this stuff, curious to hear how your interviews go.

I read your post Friday night, right before my super day at a MM shop. I definitely used some of the advice and was extended the offer for FT. Thanks a lot!I

frgna, you should feel proud for this. This is a success story.

Congrats, kedwards33.

 
frgna:

Most candidates cannot tell me WHY we look at free cash flow in simple terms.

frgna

Could you help me on this one? I kinda know, but not well enough to explain in interview. And do you know any other questions of this type off the top of your head?

Currently going through the BIWS and WSO guides.

 
Fetter:
frgna:

Most candidates cannot tell me WHY we look at free cash flow in simple terms.

frgna

Could you help me on this one? I kinda know, but not well enough to explain in interview. And do you know any other questions of this type off the top of your head?

Currently going through the BIWS and WSO guides.

due to the fact that free cashflow is the value of the company's earnings attributable to all investors. Basically, this is the potential earnings for investors in this company.
 
Connecticut Yankee:

My secret to nailing the analyst interview was getting hammered the night before with the analysts on jag bombs and macallan 18

The social events are definitely important - if they take you to dinner/drinks, that's part of the evaluation too. Stay out until a reasonable hour. Don't say "I have to go back to study/prepare" even if you do - just say you should probably get some rest for the big day tomorrow.

Do NOT drink so much you oversleep on superday (yes sadly I have seen it happen, and to a candidate who was formerly the leading choice).

if you like it then you shoulda put a banana on it
 

My question is not how to behave during the interview, but how to attract recruiter say," Hey, you look interesting, let's schedule an interview." That's the real issue for me now.

 
christinema:

My question is not how to behave during the interview, but how to attract recruiter say," Hey, you look interesting, let's schedule an interview." That's the real issue for me now.

  • Network
  • Resume --> target school, relevant job experience, student associations, experiences abroad, voluntary work, special interest / hobbies?

Differentiate yourself!

 

SB for you, Bookmarked webpage, Great post!!

As a remorseful fresh Big 4 auditor teaching myself technicals and trying to get into banking/TAS/away from audit in general, this is great information.

"You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right." -Warren Buffett
 

I actually landed an FT analyst gig this summer, but this is great advice, Thanks, SB for you!

"When a defining moment comes along you define the moment or the moment defines you."
 
Cotton Eyed Joe:

Fantastic post!! Read this over the weekend a few times before my interview on Wednesday. Refined my answers to the "short and sweet" format (they were pretty long before) and I landed the offer! Starting this January as an analyst!

Great news, glad to hear it!

if you like it then you shoulda put a banana on it