Job Modelling Test

Ah, the thrill of a LevFin modeling test at a Bulge Bracket (BB) bank! Based on the most helpful WSO content, let's dive into what you might expect and how to prepare for this crucial step in your finance journey.

1. Blank Sheet vs. Functional Model: The approach can vary by bank, but generally, you might be given either a blank Excel sheet to build a model from scratch or a partially completed model where you're tasked with making specific adjustments. For a LevFin role, be prepared for both scenarios. The blank sheet test assesses your ability to construct a model from the ground up, focusing on your understanding of the relationships between the financial statements and your ability to project them forward. On the other hand, a functional model might test your analytical skills, asking you to optimize the debt structure or analyze entry/exit multiples.

2. Key Components to Expect:

   • Three-Statement Model: This is the foundation. You should be comfortable linking the income statement, balance sheet, and cash flow statement dynamically. This includes projecting revenues, expenses, working capital, and capex to determine free cash flow.
   • LBO Model: Given the LevFin focus, an LBO model is highly likely. This would test your ability to structure a deal, including debt layers (senior, mezzanine, etc.), interest calculations, and how these affect the investment's returns. Be ready to play with different debt structures to see their impact on the IRR and cash-on-cash returns.
   • Debt Structure Optimization: This could involve adjusting the mix of debt types to find an optimal cost of capital or to maximize returns under different scenarios. Understanding the nuances of different debt instruments and their covenants is key.
   • Entry/Exit Multiple Analysis: You might be asked to analyze how different entry and exit multiples affect the investment's returns. This could involve sensitivity analysis to show how changes in these multiples impact the IRR.

3. Preparation Tips:

   • Brush Up on Excel: Speed and accuracy in Excel are crucial. Know your shortcuts and practice building models under time constraints.
   • Review Financial Concepts: Make sure you're solid on the fundamentals of corporate finance, accounting principles, and valuation techniques.
   • Practice with Real Models: If possible, practice with models from previous LevFin deals or case studies. This will help you get comfortable with the types of scenarios you might face.

4. Resources:

   • WSO Elite Modeling Package: This package offers comprehensive training in financial modeling, including LBO and valuation modeling, which could be incredibly beneficial for your preparation.
   • Mock Tests and Practice: Look for any available mock modeling tests online, especially those tailored to LevFin roles. Practice under timed conditions to simulate the test environment.

Remember, the key to success in these tests is not just technical knowledge but also the ability to apply it under pressure. So, practice, practice, practice! And don't forget to breathe; you've got this.

Sources: What can I expect: a REPE Top 5-10 modelling test?, Lateral Hire analyst modelling test., 2-hour Modeling Test for HF (Fundemental Equities) - What to expect?