What Models to Know for Interview?
What modeling techniques are you supposed to know for an entry level interview? - think NYC analyst for a BB
I'm studying the BIWS 400 Qs guide and I'm using BIWS and youtube (rareliquid, etc.) to learn 3 statement modeling right now, about to move on to DCF modeling.
There seem to be simple versions of every type of model, and versions where you're supposed to take the financials from a company's 10k and project everything, where does this land in interviews?
Thoughts/insights?
Based on the most helpful WSO content, for an entry-level interview for a NYC analyst position at a BB (Bulge Bracket), you should be familiar with the following modeling techniques:
Three-Statement Models: This is the bedrock of financial modeling, integrating the income statement, balance sheet, and cash flow statement. It's crucial to understand how they interlink and affect each other.
DCF (Discounted Cash Flow) Models: A fundamental valuation technique used to estimate the value of an investment based on its expected future cash flows. You should understand how to calculate the weighted average cost of capital (WACC) and how to forecast free cash flows.
M&A (Merger and Acquisition) Models: These models assess the financial viability of a merger or acquisition. You should know how to calculate accretion/dilution of earnings per share and understand the impact of different purchase considerations.
LBO (Leveraged Buyout) Models: Important for private equity, these models evaluate the return on investment when a company is bought with a significant amount of borrowed funds.
Regarding the complexity of models in interviews, it often depends on the firm and the role. However, for entry-level positions, interviewers typically expect candidates to understand the basic concepts and mechanics of these models rather than the ability to build complex, multi-layered models from scratch. They might provide a simplified version of a model and ask you to make certain calculations or projections.
For more advanced interviews, you might be expected to take historical financial information from a company's 10-K and make projections. It's always good to be prepared for both scenarios, but for entry-level roles, the focus is usually on understanding the basics well.
Remember, having a logical and structured approach to building models is often more important than memorizing complex formulas. Interviewers will be looking for your thought process, understanding of the fundamentals, and whether you can apply them in a practical context.
To further prepare, consider leveraging resources like the WSO Financial Modeling Prep Pack, which can provide you with a structured learning path and practice models that are aligned with what is expected in these interviews.
Sources: Analyst Lateral from MM to BB/EB, https://www.wallstreetoasis.com/forum/investment-banking/qa-2nd-yr-ib-analyst-australia?customgpt=1, Q&A: West Coast Tech IB Analyst, Q&A 2.0: 3rd Year BA/A/AC At MBB Going To UMM/MF This Summer, Q&A: Current 3rd-Year BB Coverage Analyst
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