Tough Technical Questions
I’m currently prepping for SA 2023 IB interviews. Drop the most difficult technical questions that you have received in interviews.
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Use the fucking search bar and read the 50 pages of WSO that already exist about this
Think I haven't done this already, smartass? Maybe get a full-time offer before you start chirping
Who's chirping? I gave you an order and then, just now, you copped to obeying me like the little bitch you are.
Jeeeez man. Someone needs Jesus with all that pent up anger.
Everything’s gonna be okay man just take it easy.
$10 of depreciation increase
Chuckled unexpectedly
Do you follow Sameer Mechant?
Is not hard to answer this, the thing that most people forget is how it affects taxes.
Ass or Tits
heard about one kid who had to answer "tits or titties." he had a stroke
Some more challenging questions, but not too bad…
And the toughest question of all…
Good luck
This is for an SA interview? Seems intense af
He asked for tough, not necessarily probable… but have heard these come up at my old shop when we were interviewing. And… the answer is ‘yes’, the guy that asked these Qs had ‘sharp elbows’
holy... if got asked that i'd fold LMAO
Yeah bro no shit. I’ll straight up ask them whether they took the wrong interview sheet or I went into the wrong room
How would you actually answer the below q?
"Let's say you start a business with 100 bucks. Day 1 you have 100 in cash and 100 in equity. EV is zero. Reconcile that for me… surely your business has value"
My thought is that this is more of a "think through it" question than trying to give a factual answer. Having cash and equity doesn't matter if the business is not a going concern. Is there revenue? Are there cash flows? It's not like a business worth $100 has a market value so EV is kind of irrelevant - not every business is going to be "valued" based on it's balance sheet cash and book value of equity. I could be completely off base though.
Tricky question. Using simplified formula: Enterprise value = Equity value + debt - cash; gives Enterprise value = 100 + 0 - 100 = 0. Enterprise value is zero. "Surely your business has value" - yes it does, but to help answer the question we need to realise how equity and enterprise values are defined.
Equity value is the value of the WHOLE business to EQUITY investors - the whole business value of this business is 100 to equity investors.
Enterprise value is the value of the CORE OPERATING business to ALL investors (word operating is crucial here) - the business CORE OPERATING value is zero because the business has no operations. It does not have any operating assets and liabilities and it does not generate any revenue, costs or cashflows. DCF would give 0 enterprise value and 100 equity value. Multiples would give 0 enterprise value and 100 equity value.
There is nothing to reconcile, we just need to be careful around definitions, and what the interviewer means by "surely your business has value" - yes it has equity value of 100 and enterprise value of 0.
The answer is a lot simpler than other people are making it out to be, because most people don’t have a true understanding of EV. A lot of people think of it as the “takeover cost” which isn’t really accurate given how deals can be structured and that private sellers may often pay a large amount of the current cash the business has out to themselves as part of the sale. Think of Enterprise Value as the value of the operations of the business to all stakeholders. Cash isn’t part of operations (except restricted cash which would be included as an operating asset), so we would remove it when trying to value the operating assets of the company. The company has an EV of 0 because its operations have no value, but it’s equity does have value because it has the right to those $100 of cash. Start to think about how things like NOLs would factor into EV and you’ll see why this definition fits more.
How would you actually answer the below q?
Let's say you start a business with 100 bucks. Day 1 you have 100 in cash and 100 in equity. EV is zero. Reconcile that for me… surely your business has value
GS and Nomura/UBS just to piss off elitist and prestige-obsessed fucks.
Bro what, i’m a ft analyst and can answer like 2 of these lmao
I literally only know these cause I studied for CFA. Never would've known these for SA interviews. Hardest things that came up for me involved PIK notes, dividend recaps, and paper LBOs. I did have to give a 5 minute merger pitch once though.
Never was asked about a Fama-French, put-call parity, or theta (or any of the Greeks for that matter) or anything even close to that stuff. WTF? Just what?
One question that I got asked on every single interview and superday this fall (albeit for MBA Summer Associate position) was how will the impending increase in interest rates and corporate taxes affect WACC and valuations.
Doesn’t sound too tricky. Rates rising depresses valuations through WACC/cost of debt rising (for new borrowings at least), same with tax rates as it directly lowers UFCF.
at the highest level, tax impacts DCF in 3 ways
- Cash flows: Tax impacts after-tax op profit
- After-tax cost of debt: Tax shield
- Cost of equity: What you say? How? Well how do I unlever beta? Asset Beta = Equity Beta / ((1+(1-tax rate)*(D/E))... then I have to relever right?
Definitely something to keep in mind if folks are getting into details...
I could be wrong, however, and your thoughts on tax rates are fine...
Respectfully, I think you are asking the wrong questions. Hard technical questions (to which you are not reasonably expected to know the answer) are really intended to test you under pressure. I personally don't love these types of questions and use them very sparingly... and usually concepts that are tough, but not impossible for you to have the answer - I have never dinged anyone for not getting the right answer. But some candidates have impressed me with how they think about things. One guy got the answer 100% wrong (think said positive when he should have said negative). But his thought process was so clear, he just made one bad assumption - which under pressure with a question he had never seen before I can 100% forgive. Gave him an offer and he is a rockstar. The 338 question does not qualify. I know many experienced bankers who don't fully understand it and rely on external M&A counsel (which they should).
An interviewer using these types of questions is wasting everyone's time. I'm willing to bet no one gets this answer, and I'm similarly willing to bet that anyone who actually did get the answer would likely be failing in other key areas. In the long term, front-office roles are still client service/facing businesses (even at the junior level). There is a thing as being too much of a hardo.
I'm careful when I say this (as I don't want to sound dismissive, especially when I was in my younger more junior days), but genuinely, if I got that interview question I would make a mental note to ding the interviewer and company (and recruiter if I was so introduced). I wouldn't do anything dramatic like walk out or screw with the interviewer.
Side note: People seem so intense now adays. I don't know if it's just the internet or this is an anonymous finance forum, but the nature of our jobs is to keep people calm while they write multi-million/billion $ checks.
I don't disagree. The more nuanced/challenging technical questions have a low probability of coming up. Even if they do--to your point--it's really to see how you react and how you'd think about the question.
Very interesting perspective on the 338 as--when I was in M&A--that question did come up. It was more around getting to the tax implications at a glance and certainly not the dense 'legalese' of a 338.
This response should be bookmarked for so many young professionals.
I agree with all of this and have taken a similar tact when interviewing or speaking to younger professionals.
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