I have a tech screen (30m phone call) on Thursday AM and I have been told by multiple people at the firm that while this is a VERY classic IB interview, there will be a heavy emphasis on actual accounting adjustments, i.e., "walk me through how..", vs 30 minutes of definitions, walk me through a valuation, which cost of x is higher, etc. They said the questions won't be hard, but they want to see that I know the 3 statements in and out vs just knowing the most classic memorizable IB answers.
So, can you guys help me come up with 10-15 "classic" accounting adjustment questions? Literally all I can think of is "how does $10 in depreciation flow through the 3 statements?". I'm just confused because they said it will be simple, but beyond that I'm not sure what they could ask that doesn't involve DTA/DTL or some other random shit.
I got like a crap ton. the most infamous one I received in so many interviews: Walk me through the changes in the three statements if there’s a $10 depreciation expense. pm me and I can send the rest of my list.
Really should've clarified, meant to say pm email.
pm'd, thanks. Also, I hope I get that question. It's the only one I can find so I have it hammered in my head.
I am looking for new interview questions. Would you please send me the list, too? Thanks!
Please PM me as well. Thanks!
Why would you not just post it here for everyone to see?
Here’s a tough example
How does a $100 asset acquisition flow through the three statements...
1) at time zero (immediately after acquisition) assuming you pay with 50% Debt and 50% cas
2) After one year assuming the asset generates $20 in Revenue per year and it has a 10 year life with straight line depreciation. Debt incurred by the asset acquisitionhas a 5% interest rate (no amortization)
3) After it’s sold at the beginning of year 2 for $70
If you can answer that correctly, you should be good on the 3 statement questions
Do you mind jotting the answers so I can compare?
On top of this, if you want to make it even more difficult, I'd say half of the debt is funded through bank debt, and half is funded through PIK debt, due to PIK being non-cash and affecting the cash flow statement with its own BS account as well.
One associate in our team always asks what line item is present on all three statements:
Answer: Net Income (within RE on the BS).
Pretty easy compared to the questions with calculations, but the "trick" is the BS since it's not really shown in detail for RE.
The Mergers and Inquisitions 400 Questions guide lays out 5 - 6 different questions that follow this line of questioning. I think it would be valuable to understand write-downs as well as write-ups and their affect on the 3 statements.
The question I recently received is:
Q) You have a PP&E balance of $100 and they are all written down to $0, walk me through how this flows through the 3 statements.
Income Statement: $100 write-down decreases pre-tax income by $100. Assuming 40% tax, Net Income falls by $60.
Cash Flow Statement: Net Income down $60, but since a write-down is a non-cash expense we add it back to get cash from operations of $40 ($-60+$100).
Balance Sheet: Cash is up $40 and PP&E is down $100 so assets are down $60. Net Income flows into retained earnings which was down $60 so the balance sheet balances.
With all these questions it is usually best to start with income statement then cash flow statement then balance the balance sheet.
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