Hardest technical interview question + answer

sealdive's picture
Rank: Chimp | banana points 7

Curious about the most difficult technical questions people have been asked. please provide answers (preferably correct) if possible.

What are Technical Interview Questions?

Technical questions typically follow after behavioral and fit interview questions such as: why this firm, describe an example of teamwork, etc. While technical questions may vary depending on which position you are applying for, the WSO community has come together to compile a list of some of the more challenging technical questions. Some of these questions may follow cookie cutter example to derive an equation, or to questions that evaluate your thought process.

List of Tough Interview Questions

Please not that this is not an all-inclusive list as some firms will question different aspects of finance, accounting, the markets, etc. This is just to provide some examples.

  • What is the difference between EBIT and EBITDA?
  • Derive the black scholes equation
  • What is a common evaluation that investment bankers/M&A use?
  • How would you hedge X example?
  • How would you invest a clients money?
  • What is the difference between a forward and future option?

Some more mentally challenging questions are:

  • How many gold balls fit in a Boeing 747?
  • If you take 7 steps forward and 3 steps backwards, how many steps have you taken?
  • Would you rather be rich or famous?
  • Why is a manhole round?

If you have any other challenging questions that you've either heard or experienced in an interview, please comment below!

Preparing for Investment Banking Interviews?

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Comments (153)

Best Response
Jan 12, 2010

Question: Would you suck my dick for this job?

Answer: Yes

    • 6
Jan 12, 2010
harv5889:

Question: Would you suck my dick for this job?

Answer: Yes

Isn't that more of a fit question?

    • 4
Jan 12, 2010
drexelalum11:
harv5889:

Question: Would you suck my dick for this job?

Answer: Yes

Isn't that more of a fit question?

Yes, a more technical question would be:

How would you suck dick for this job?

Answer: Work the shaft, fondle the balls, and swallow the gravy.

    • 4
    • 2
Jan 12, 2010

AHAHHAHAHAHAHAH, thanks for making me laugh out loud in class !

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May 6, 2013

Thank about, "what other divisions have you thought about, and why did you decide to apply IB instead?"

May 6, 2013

APV stuff

May 6, 2013

Derive the black scholes equation.

May 6, 2013

Increase $100 in revenue. Trace through effect in income statement, statement of cash flow, and balance sheet. Not brainbusting but you have to be careful.

May 6, 2013

These are the toughest you've ever gotten? Other than the black Scholes question these are all questions you should know pretty well if you use the WSO guides...

May 6, 2013

Do you think my wife is attractive?

May 6, 2013

In my first round associate interview at Salomon, an MD asked me

  • walk me through how you might derive the black-scholes formula by using a real options approach
  • argue for the right discount rate to apply to 338-related amortization tax shields
  • your client is anticipating a hostile overture. What would you want to consider?
  • Rupert Murdoch asks you to give him an advantage on a sale process you are running for your client. You are in the running for a mandate for News Corp. The inference is that there might be a quid pro quo. What do you do?
  • would you rather be rich or famous?

In fairness, I wasn't the average associate candidate, either.

    • 1
May 6, 2013
GenghisKhan:
  • argue for the right discount rate to apply to 338-related amortization tax shields

would you mind providing a brief explanation on this?

My understanding for a 338(h)(10) is that the buyer receives a step up in tax basis and can then depreciate the assets using the new value going forward. Wouldn't this just be based on projected useful life and one of the depreciation methodologies (straight line, accelerated, or macrs), which then impact the IS in the form of tax savings? Why does the amortization tax shield need to be discounted?

May 6, 2013

My answers were

  • long conversation on step by step real options approach. Some coaching was required on his part to get us through it, but overall I think I demonstrated an acceptable grasp of the relevant concepts
  • given that discount rates are a proxy for risk, I walked through the risks I could see and argued for a number somewhere slightly higher than pro forma company (target and acquiror combined) cost of debt
  • list of items including state/country of incorporation, waivers or exemptions from statute in by-laws and articles of incorporation, structural defense profile (poison pill, staggered board, no action by written consent, blank check preferred, etc.), shareholder base and insider holdings), capitalization and financial profile, information on acquiror
  • no way. Even if you ignored the most important thing, the duty to your client, how could Rupert ever hire me again knowing I was willing to sell out my client?
  • I have no interest in fame (ie, I dodged the question by saying money without having to say "I am greedy")
    • 1
May 6, 2013

Because an (h)10 election requires a dual election. Seller can hold you up and force you to pay for his agreement to the election. The question really becomes what is the maximum you, as buyer, should be willing to pay for that.

    • 1
May 6, 2013

This was the hardest question I was ever given in a first round interview. (It was for a quant position on a fixed income derivatives desk)

X_t and Y_t are two assets that are driven by correlated jump diffusions.

X_t is tradable but Y_t is not.

Suppose the risk-free rate r_t can modelled using Hull-White, find the best possible hedge for Y_t.

I didn't get the job, and after the interview, I didn't want it either.

    • 1
May 6, 2013

By hedge, I mean find the best dynamic hedging strategy.

May 6, 2013

"Tell me a little about yourself"

I was stumped.

May 6, 2013

I think interviewers are just bored at work and ask retarded questions in interviews to amuse and entertain themselves...they might be actually indifferent to who is hired cuz everyone interviewing can do the job anyway

May 6, 2013
jim_beam:

I think interviewers are just bored at work and ask retarded questions in interviews to amuse and entertain themselves...they might be actually indifferent to who is hired cuz everyone interviewing can do the job anyway

No

May 6, 2013

From what I can remember, during my first analyst interview an MD asked me:

  • A pretty generic question about how I would invest a client's money supposing he won the $100mm lottery
  • What books I had read on structured finance
  • Explain how I had used different types of modeling--stochastics and bollinger bands
  • If I washed my hands before or after the bathroom (I was stumped here, but he argued before, considering what you're touching before you go. good point>)
    • 1
May 6, 2013

"So what do you want to do this summer?"

May 6, 2013

Unless you were interviewing to be an options trader, why would you be questioned about Black-Scholes model? Just curious.

man made the money, money never made the man

May 6, 2013
mr1234:

Unless you were interviewing to be an options trader, why would you be questioned about Black-Scholes model? Just curious.

I made the mistake of saying on my resume that I worked as a research assistant to a Nobel laureate in economics.

    • 1
May 6, 2013

Well my interests at the time were: Trading, PE, AM, M&A.

My resume was fit for all three. Then the interviewer started firing questions at me why I didn't apply to PE/AM.

DYEL

May 6, 2013

You have final rounds at GS, MS, Evercore, and us? Why us? if we give you an offer, will you accept? Why? Why not?

You'll never have a perfect answer.

    • 1
May 6, 2013

Got these all during SA interviews.

Walk me through the accounting at day 0 and day 365 for a $100m PIK note at 10% interest paid annually (be careful about where you add back the non-cash exp on the CF statement). Got this at two different banks actually.

What is a 338(h)(10)?

Would you rather have $100 of A/R or Inventory if you are a solid company with strong operating margins - assume short cash conversion cycle (its inventory btw)

Which line on your resume is the most bullshit?

Give me examples of how you could create a DTA and DTL.

"Success means having the courage, the determination, and the will to become the person you believe you were meant to be"

    • 1
May 6, 2013

I know this is an old thread, but why is the answer inventory for the question: "Would you rather have $100 of A/R or Inventory if you are a solid company with strong operating margins - assume short cash conversion cycle?"

    • 1
May 6, 2013

I think it's because adding to accounts receivable is a 'use' of cash in that you are using up more money while you are waiting for payment in addition to the 100 dollar decrease in cash flow from ops, whereas Inventory is only using up the 100 dollar decrease in cash flow from ops. I think short cash conversion cycle would imply you use up money fast.

May 6, 2013

Because with 100 in A/R, your cash flows are capped at 100. With 100 Inventory, at minimum (barring financial troubles), you should receive 100 in cash (liquidation value) but also have the potential to sell for much higher. Essentially, 100 in A/R gives your profit a range of 0-100 (0 if it COGS was 100 to 100 if it was pure profit), where the idea is that 100 in inventory has much more upside value.

May 6, 2013

A/R you just collect at face value, and would only be more value if you are in a tight liquidity situation. The inventory, which is held at cost can be sold at cost plus normal profit margin. So $100 in inventory, plus 25% margin is $125 at the end of the day, the $100 in A/R, is still $100 when its collected.

May 6, 2013

Ok, thanks for the help everyone! Does the answer or the approach to the answer change in any way if the question assumed a long cash conversion style?

Jan 12, 2010

fantastic response drexel

May 6, 2013

Not sure if this is 100% accurate, but my interviews w/ MMs and boutiques tended to be much more technical... names like HL and Rothschild come to mind from my own experiences...

Those questions aren't actually that tough, but I felt that same way last year b/c I didn't have my internship yet. I'm sure the guys on here that actually work in IB can share much more about this with you than me, but once I was at my internship and forced to deal w/ the shit everyday it becomes second nature.

No idea about NYC vs Regionals, but I interviewed for HL in NYC and Chi and they both were picky bastards on tech.

'Before you enter... be willing to pay the price'

May 6, 2013

www.ibankingfaq.com is a good site to cram on before an interview...but yest you should be prepared for that stuff.

May 6, 2013

From my experience going through it, BB banks were always less technical. They know they offer a phenomenal training program, so they worry more about fit and personality.

May 6, 2013

You'll get screened via the basic technicals and then you will possibly get pushed to test your limits if the guy is just in that kind of mood.

Basics:
3 ways to value a company: not just listing the name of the method but the mechanics behind it
What is EBITDA, why is it used/useful?
What is enterprise value, how is it calculated
How do the 3 statements tie together
walk me through $10 change in depreciation to the 3 statements
Name some multiples you'd use for blah blah...
Would you ever use an Equity/EBITDA multiple? Why or why not?

Starting to approach the pushy side:
A company buys an asset on Jan 1 for $100, it is financed half with debt, half with cash; walk me through the effects to the financial statements at beginning of the year
---now one year later, walk me through the effects to the financial statements
----this asset was purchased with the expectation it would generate revenue...so what would changes thus be to 3 statements (it starts getting more tricky remembering stuff and keeping everything straight with each layer he adds)
Where do you find a company's common shares outstanding
--How do you calculate diluted shares outstanding
-----what is the treasury stock method
---------walk through an example/calculation of treasury stock method
Walk me through an LBO
--what are the drivers of an LBO
----what are the important multiples for an LBO
If a company has EV/EBITDA of 10x, Debt/EBITDA of 4x, no cash, market value of equity is $360mm, calculate the $ amount of debt.

Jan 12, 2010

One question which I had to think about:

Influence of the change from FIFO to LIFO (or the other way around) on (1) FCF and the value of a company using DCF and on (2) earnings and its P/E ratio. Assuming that this will not have an impact on the value of a company, why does the P/E ratio change? Price of a stock reflects discounted cash flows as well.

In the first scenario, change in COGS will be offset by the change in NWC (it has also a tax effect). Earnings will be influenced so P/E will change. Using the same P/E ratio, the stock price needs to be adjusted which is contrary.

Brainteaser:

You have 100 switches which are turned on. If you pass one switch it will be turned off or on respectively depending on the status at that moment. With how many switches turned on do you end?

Jan 13, 2010
dagobert_duck:

One question which I had to think about:

Influence of the change from FIFO to LIFO (or the other way around) on (1) FCF and the value of a company using DCF and on (2) earnings and its P/E ratio. Assuming that this will not have an impact on the value of a company, why does the P/E ratio change? Price of a stock reflects discounted cash flows as well.

In the first scenario, change in COGS will be offset by the change in NWC (it has also a tax effect). Earnings will be influenced so P/E will change. Using the same P/E ratio, the stock price needs to be adjusted which is contrary.

Brainteaser:

You have 100 switches which are turned on. If you pass one switch it will be turned off or on respectively depending on the status at that moment. With how many switches turned on do you end?

what's the answer for the brainteaser?

May 6, 2013

Go buy the interview guides.

May 6, 2013
notaspammer:

Go buy the interview guides.

Can you name one that's even better than M&I?

May 6, 2013

Breaking into wall street from M&I will cover everything

May 6, 2013
JohnAnthony7:

Breaking into wall street from M&I will cover everything

I feel they are good for the 1st round's technicals, I'd rather be over prepared for the 2nd round

May 6, 2013

Not really a technical question but the classic why IB and why XX firm in my mind are the absolute toughest to give good answers to.

Technical questions by and large are easy as there are concrete right and wrong answers and knowing them is generally the result of brute force memorization. It helps if you have a bit of Asian in your blood.

May 6, 2013
reformed:

knowing them is generally the result of brute force memorization. It helps if you have a bit of Asian in your blood.

you're going about this the wrong way

May 6, 2013

Why is WACC U-shaped?

Not a difficult question per se but can throw you off if you haven't heard it before.

Assuming we ignore the affect of taxes, what happens to WACC when we increase leverage?

My annoying finance prof always asks us theoretical questions like this. Again, not hard but makes you think about the affect of leverage in a different way.

May 6, 2013
arguewithatree:

Why is WACC U-shaped?

Not a difficult question per se but can throw you off if you haven't heard it before.

Assuming we ignore the affect of taxes, what happens to WACC when we increase leverage?

My annoying finance prof always asks us theoretical questions like this. Again, not hard but makes you think about the affect of leverage in a different way.

Wacc will decrease first since the cost of debt is in general lower than cost of equity, so increasing leverage helps reduces WACC initially and WACC reaches the lowest point. As legerage keep increasing, the cost of equity will increase significatly since the beta will shoot up for highly leveraged firm (more risk), in addtion the highly leverage firm will pay more to secure more debt. Thus the WACC will drop first to a point then increase, aka a u-shaped curve.

May 6, 2013
uoft2013:
arguewithatree:

Why is WACC U-shaped?

Not a difficult question per se but can throw you off if you haven't heard it before.

Assuming we ignore the affect of taxes, what happens to WACC when we increase leverage?

My annoying finance prof always asks us theoretical questions like this. Again, not hard but makes you think about the affect of leverage in a different way.

Wacc will decrease first since the cost of debt is in general lower than cost of equity, so increasing leverage helps reduces WACC initially and WACC reaches the lowest point. As legerage keep increasing, the cost of equity will increase significatly since the beta will shoot up for highly leveraged firm (more risk), in addtion the highly leverage firm will pay more to secure more debt. Thus the WACC will drop first to a point then increase, aka a u-shaped curve.

Yeah. And interest rates will start to rise if a company is over-leveraged. You didn't answer the second question though. We're assuming there is no tax shield, so what happens to WACC as we add leverage if WACC is just = E/VRe+E/DRd?

May 6, 2013
arguewithatree:

Why is WACC U-shaped?

Why does gamma jump like a kangaroo?

May 6, 2013

Another good one that threw me off for a while: when levering beta why do you multiply by debt/equity rather than debt/equity+debt

May 6, 2013
arguewithatree:

Another good one that threw me off for a while: when levering beta why do you multiply by debt/equity rather than debt/equity+debt

I've no idea about this one

May 6, 2013

Can you guys answer the questions you just threw out there?

May 6, 2013

Sure, but OP/anyone else want to take a shot at it first?

May 6, 2013

HEARD ON THE STREET: QUANTITATIVE QUESTIONS FROM WALL STREET JOB INTERVIEWS

May 6, 2013

Got one:
How does goodwill impact the accretion/dilution in M&A?

May 6, 2013

Can anyone also take a look at my M&A question:

"How does goodwill impact the accretion/dilution in M&A?"

May 6, 2013

Goodwill shouldn't have any impact at all, if I'm reading your question correctly

May 6, 2013
FernandoTorres9:

Goodwill shouldn't have any impact at all, if I'm reading your question correctly

I was thinking about the following scenario:
Say, Firm A and Firm B both want to acquire Firm C. Firm A offers a higher puchase price than Firm B. So goodwill is higher for A&C than B&C. Suppose both transactions are financed by half cash and half debt. A higher purchas price implies Firm A's interest expense on debt and forgone interest income on cahs will be higher than B's, so it will effect the proforma net earning and EPS.

So a higher Goodwill will make it less Accretive. Does my rationale make same?

May 6, 2013

"I was thinking about the following scenario:
Say, Firm A and Firm B both want to acquire Firm C. Firm A offers a higher puchase price than Firm B. So goodwill is higher for A&C than B&C. Suppose both transactions are financed by half cash and half debt. A higher purchas price implies Firm A's interest expense on debt and forgone interest income on cahs will be higher than B's, so it will effect the proforma net earning and EPS.

So a higher Goodwill will make it less Accretive. Does my rationale make same?"

That just means that A is paying more than B, so yes, a transaction is less Accretive (or more dilutive) if the buyer pays more for the target

May 6, 2013

My bad, I was mistaken. Rd should stay the same. The only way Rd would change is if the beta of your debt changes, and this would occur if your debt was not low risk. I think the theory assumes that the debt is of low risk. Someone correct me if I'm wrong though.

D/V will increase, Rd will be constant, E/V will decrease, and Re will increase. Your cost of capital will stay the same. Look at the link, it explains the theory really well and has examples as well.

May 6, 2013

What are 3 major valuation methodologies?

ANSWER: DCF, Comparable Companies, and then precedent transactions

Then tell me about each

G Gekko

May 6, 2013

These are questions that I've been asked...

Walk me through a DCF.

What are some disadvantages to using a DCF?

What discount rate is used in an unlevered DCF?

What discount rate is used in a levered DCF?

How do you calculate beta, and how is it used in a DCF?

What are the three ways to value a company?

What is tangible book value, as it relates to a balance sheet?

Walk me through a comparable companies analysis.

What factors come into play when contemplating an M&A, and what determines Accretion and Dilution?

Company "A" is acquiring company "B"... Company "B" has higher P/E ratio than "A"... (Dilutive or Accretive)?

Company A issues 1MM shares and has earnings of $10MM. (EPS of $10). Company A buys Company B by issuing 500k more shares for an additional $2MM in earnings. Is this deal Accretive or dilutive?

All things being equal, if we are looking at a transaction and we are contemplating doing the deal one of two ways - using 100% cash with debt or using stock - which one is most likely the most Accretive?

If two companies have the same EV, and one company has debt, but the other doesn't, which has the higher beta?

How do you calculate Enterprise Value?

What is the difference between a good company and a good stock?

Walk me through an income statement.

What is seven cubed?

If a clock shows the time 3:15, what is the angle measured in degrees between the two hands?

    • 1
May 6, 2013
BTbanker:

These are questions that I've been asked...

If two companies have the same EV, and one company has debt, but the other doesn't, which has the higher beta?

This question seems quite misleading to me.

I mean if the companies had a similar operating business one might say that the company with debt has a higher beta.

But with the information given I could not answer that question to be honest.

What am I overlooking?

May 6, 2013
BTbanker:

These are questions that I've been asked...

Walk me through a DCF.

What are some disadvantages to using a DCF?

What discount rate is used in an unlevered DCF?

What discount rate is used in a levered DCF?

How do you calculate beta, and how is it used in a DCF?

What are the three ways to value a company?

What is tangible book value, as it relates to a balance sheet?

Walk me through a comparable companies analysis.

What factors come into play when contemplating an M&A, and what determines Accretion and Dilution?

Company "A" is acquiring company "B"... Company "B" has higher P/E ratio than "A"... (Dilutive or Accretive)?

Company A issues 1MM shares and has earnings of $10MM. (EPS of $10). Company A buys Company B by issuing 500k more shares for an additional $2MM in earnings. Is this deal Accretive or dilutive?

All things being equal, if we are looking at a transaction and we are contemplating doing the deal one of two ways - using 100% cash with debt or using stock - which one is most likely the most Accretive?

If two companies have the same EV, and one company has debt, but the other doesn't, which has the higher beta?

How do you calculate Enterprise Value?

What is the difference between a good company and a good stock?

Walk me through an income statement.

What is seven cubed?

If a clock shows the time 3:15, what is the angle measured in degrees between the two hands?

Very good, comprehensive set of questions. Thumbs up !

May 6, 2013

While probably obvious, make sure you read the WSJ the week leading up to your interview (if you don't already). I can't count the number of times I've heard interviewers ask about specific big news events and ask me to shed light on the issue

G Gekko

May 6, 2013

I would seriously recommend buying the case studies by breaking into wall street

G Gekko

May 6, 2013

Thanks guys!!!

May 6, 2013

BTbanker had a good list. Most common question I've been asked is - "how does $[100]mm in cap ex flow through the 3 financial statements in years 0 and 1, assuming [10] year straight line depreciation and [40]% tax rate"

How would I value a revenue generating asset with a finite life of 20 years and no recovery value?

How would your DCF change if I you wanted to look at it from the point of a lender? (just a variation of the levered vs unlevered said above)

A company has a 5% dividend yield and a 50% payout ratio, what is the P/E?

Company A and B have identical revenue, growth rates and EBITDA margins. Why could company A be valued at a higher EV/EBITDA multiple?

May 6, 2013

some i got recently at a superday

what is PEG ratio

why do companies IPO

assuming all else equal, when doing a DCF valuation, which will affect EV more: 10% change in revenue or 10% change in cost of debt?

May 6, 2013

10% change in Revenue. DCF uses unlevered cash flow, which ignores the effects of debt. (i.e. tax EBIT directly to get NOPAT).

May 6, 2013
bonobochimp:

10% change in Revenue. DCF uses unlevered cash flow, which ignores the effects of debt. (i.e. tax EBIT directly to get NOPAT).

For uFCF you're still discounting it by the blended WACC so a higher debt cost would reduce the PV.

I'm also wondering if the question meant that the cost of debt changes by 10% (ie if originally 5% cost of straight debt: 5% * 110% = 5.5%) or increases by 10% as in 1,000 bps (ie 5% + 10% = 15%). I guess either way, their directionally the same.

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7,548 questions across 469 investment banks. The WSO Investment Banking Interview Prep Course has everything you'll ever need to start your career on Wall Street. Technical, Behavioral and Networking Courses + 2 Bonus Modules. Learn more.

Jan 12, 2010

The only hard technical question is the one you don't prepare for. If you are readily prepared, you can spin any question and answer so that the interviewer is impressed with your financial knowledge.

May 6, 2013

Why does Hedge Fund Exist?

Live like an artist and work like an analyst......

May 6, 2013

Why does Hedge Fund Exist?

Live like an artist and work like an analyst......

May 6, 2013

I tend not to ask difficult technical questions in intern interviews.

If I had to, I wouldn't go over the top in difficulty, as it wouldn't achieve anything other than demonstrating that I was a cock.

The hardest I would go would probably be "Using the Gordon Growth model, can you explain to me why multiple valuation is dubious for a company in the middle stages of growth? Can you then explain to me why bankers use multiples for these sort of companies anyway?"

May 6, 2013

Would the answer be that multiples don't take growth into account? With the Gordon Growth model you have to have a growth rate (even if it's 0%), but with multiples the only place you take growth into account is in revenue growth, which is reflected in the EBITDA and EBIT halves of the multiples formula, but not in the EV/EBITDA or EV/EBIT halves. So if your company is in the middle stages of growth, but all of your comps are companies in the late stages of growth, your EBITDA will reflect the growth, but your multiple would be artificially low, so you'd have an artificially low enterprise value.

I don't know why bankers would use multiples anyway, maybe just because their Associate/VP/MD tells them to do so?

What's the real answer?

May 6, 2013

Which of the following is most correct?
a) Whats is your hardest technical questions?
b) Whats are your hardest technical questions?
c) What are your hardest technical questions?
d) What is your hardest technical questions?

    • 3
May 6, 2013
NuclearPenguins:

Which of the following is most correct?

a) Whats is your hardest technical questions?

b) Whats are your hardest technical questions?

c) What are your hardest technical questions?

d) What is your hardest technical questions?

C

May 6, 2013

"If I use the singular form of a verb instead of the plural form when the plural form is obviously correct, what kind of impact will that have on how dumb I appear?"

May 6, 2013

Technical questions are not hard per se. If you've prepared well enough and understand the different valuation methodologies and the pitfalls of each you'll be ok. Candidates tend to escalate the significance of technicals and ascribe an undeserved mystique/reverence for DCF modelling and multiples analysis.

Just buy a book and learn it y'all and stop putting it on a pedestal. More important things to aspire to when you start your finance/investment careers such as stakeholder engagement, how to lead a team structuring and executing deals with your lawyers, how to generate and follow up leads to generate new business.

Most senior people will not touch excel. They'd rather delegate this to junior burgers and allocate their time doing more of the above which offers higher visibility and is higher value-add leading to better remuneration. Need to stop this myopic focus on financial modelling. It ain't that glamorous so just learn it and move on. Could probably outsource a lot of this stuff to india and still achieve the same results.

Jan 12, 2010

How many people are having sex (in the world) right at this moment in time?

Just my 2c.

May 6, 2013

I saw in another thread someone talked about some really annoying math type questions they were asked. The one I remember is: "What is the ninth root of 700?" - i.e. 700 ^ (1/9)

I consider myself pretty good at math but I have no idea how you'd answer that with only a pencil and paper. My best guess is to use the following logic:
1 ^ 9 = 1
2 ^ 9 = 512
2 ^ 10 = 1024

Therefore, the ninth root of 700 must be a bit more than 2 (it should be obvious that 3 ^ 9 is far too large... it is 19,683 in fact.)

Curious if anyone has any other ideas. I like these kids of logic math problems but not sure there is any real way to train for them. Anyone know any good books or other guides? I've found some GMAT stuff to be similar but not totally the same.

May 6, 2013

Guesstimating here but:

I'd think of the ninth root of 700 as ' x^9=700 '. This can be rewritten as 700 = (x^3)^3. I'll replace x^3 with 'n'. Now we've got 700 = n^3. Quick mental math/knowing powers of 2 and 3, you know 8^3 = 2^9 = (2^3)^3 = 512, and 9^3 = 3^9 = (3^3)^3 = 729. As 729 is closer to 700 than 512, intuitively it has to be greater than or equal to 8.5 and less than 9. I'll take the midpoint for simplicity's sake, so n = 8.75. The problem is now 8.75^(1/3) = x. The cube root of 8 is 2, and it has to be less than 2.5 because 2.5^2 = 15.625 (I know what 25 squared is from memory), so I'll just be lazy and say the ninth root is 2.1.

I was asked a similar question to this in an S&T interview. Pure math is not nearly as hard a brain teaser.

May 6, 2013

good one.

Jan 12, 2010

^^ Seriously? Did you actually get that question? If so, it's a rather nice spin on the classic consulting questions... how many telephone poles/people getting hair cuts per year... etc.

Anyone want to take a stab at it?

Jan 12, 2010

^ Yeah, but it was a fairly informal interview with a guy I knew before. So he was just fucking around. If that popped in a real interview that could construe (on the very extreme scale) as a sexual harassment (afaik).

My answer consisted of: laugh, saying something along the lines of "well, whatever the number is there will be one less in the future once I start this job", laughing some more, changing the subject to sport before things could get uncomfortable/gay.

The best answer would be to stand up, drop your pants, bend over the table and say "come on, one more big fella, one more".

Just my 2c.

Jul 31, 2017

Usually your debt schedules can get messed up, depending on how you're doing your revolver paydown/additions.

Jul 31, 2017

And I assume when you say DCF model you're referring to a normal three statement model? Don't think a DCF model should have any circularity.

Jul 31, 2017

I would say the most common one I get is with the automatic drawdown and payback of the revolver...

Jul 31, 2017

debt by far..think about it..the amount of debt you can service is based on cash, cash is based on interest, interest is based on principal outstanding, principal outstanding is based on amount of cash you have..tehre's your circularity.

Jul 31, 2017

is this for undergrad ??!!?! im a finance major but i dont have real life modeling experience and i have no idea

Jul 31, 2017

This easy, cell that depends on another cell will give u a risk

Jul 31, 2017

Undoubtedly in the cash sweep portion. Theres at least 20 different things that you can fuck up to ref everything out

May 6, 2013
Cries:

Undoubtedly in the cash sweep portion. Theres at least 20 different things that you can fuck up to ref everything out

Cash sweeps blow!

Jul 31, 2017

You shouldn't have any circularity if you're doing it right.

Jul 31, 2017

socola .."debt by far..think about it..the amount of debt you can service is based on cash, cash is based on interest, interest is based on principal outstanding, principal outstanding is based on amount of cash you have..tehre's your circularity".. true that...

its easy to get caught up in the minutiae of the spreadsheets... it might be simpler to make the assumption of all interest due or earned in the current year is accrued on the past years ending balance at some worst case rate... you can spend forever trying to tidy up a model. and make it technically "neat". but in real life, things are never this cut and dry.. a model need not have such complexities that you can measure a cash balance down to the 6th decimal place.. if rational simplyfing assumptions are not good enough and allow for margins of error, it's hard to see how a complex model will add substantive value.. besides of course, passing an interview

Warren Buffet and many other legendary investors have many anecdotes of his doing most of their critical calcs on backs of napkins...

one interesting incident...we were asked to evaluate an investment in a startup ... the chief was a stickler.. wanted a very detailed model to ensure that whatever we invested would tide the company over till it hit its benchmarks.... pored over every technical detail about the model.. absolutely insisted on graphing the cash balance till it hit zero.. that date in his mind would be the date till when the company could survive... its easy to get lost in the model and its technical elegance.. but sometimes you have to step back and think why would such a scenario ever happen? if you know you're going to run out of cash, wouldn't you change something in the operations of the company? try to raise more funds, cut costs, try to get sold, or if it looked bleak, wind up shop early.. why would you spend all the capital you have till you hit zero? what board would allow that?? If your'e in a speeding car, and a brick wall is approaching, you don't just keep going at your steady pace and calculate how many seconds you have to survive... it may seem obvious now, but trust me, when you're in the heat of the deal, sometimes rationality goes out the window, especially when egos are at play, and the modeling mindset takes center stage..

My point is with most of these models.. the more complicated they are, the less relevant they tend to be especially over the long term.. and beyond making it look like you've done a very diligent analysis with lots of pretty charts and proving what a whiz at Excel you are, they add little... in reality, if you know or realize something unexpected is likely to happen, you change course....all variables in a system are related to each other in some fashion...for example, in an economy, if growh rates start to rise, interest rates will probably rise too, cost of debt will increase as well, as will the growth at the company and for its cost of debt....maybe the debt will get retired faster..commodity prices and input cost increases will affect margins, and cash flows....etc... . nothing lasts for 5 years on a projected trajectory as planned... all the variables coexist and move in a random but somewhat coordinated harmony....you don't need an absolute level of precision in a very technically elegant model to measure very far out.. about the only guys that need to do that are the arb and derivative quant guys who have to lock in every cent, and can or try to that mathematically to hedge out those scenarios..for the rest of us mere mortals, the KISS principle is usually the most appropriate.. keep it simple stupid..

just my two cents..

May 6, 2013

smfusr, you've been coming out with some good stuff of late. What's your background?

Jul 31, 2017

Tell us about yourself,

When was there a time you werea leader XX

Jul 31, 2017

Thanks Oreos.. same as all the rest of the monkeys on here.. finance :)

What about you blasoise? U been doing any leading of late?

Jul 31, 2017

"The existence of in-the-money options and warrants, however, creates a circular
reference in the basic formula shown in between the company's fully
diluted shares outstanding count and implied share price. In other words, equity
value per share is dependent on the number of fully diluted shares outstanding,
which, in turn, is dependent on the implied share price. This is remedied in the
model by activating the iteration function in Microsoft Excel"

Jul 31, 2017

True. Or u could algebraicly calc out the figures. Depends on how u want to go about it. I like to avoid them - circs if possible. Matter of pref.

Jul 31, 2017

Smfusr: I 100% agree that the more complicated a model and the more assumptions, the worse the model is on accurate projections for the future. In that sense, these models are really not all that different from regressional statistic models, and where consiceness and being conservative in your independent variables is the key, after all the more variables you dump into the model the higher you drive the r^2 at the end of the day because of the junk. Most of my models I try to be concise, but yes it is always a fight with management, esp when some idiots want to forecast everything down to the most minutia of line items.

Nevertheless, as for modeling with cash balance going ot 0, I would never do that in my opinion. I always set a critical cash level, customarily a min cash balance required equal to say weekly payroll, benefits, and some critical vendors without which the company simply cannot function. Projecting cash to 0 at date X probably implies the company runs out of liquidity well before date X.

Jan 12, 2010

Here's a setup for the estimation:

http://xkcd.com/563/

Jul 31, 2017

I would try to bone-up on the basics; i.e. know what bankers do, know the diference between debt and equity, know what the three financial statements are for, etc.

I was a liberal arts grad. They usually didn't expect much technical knowledge in the early rounds.

Jul 31, 2017

EBITDA Margin, I hate you b/c of your name - Only calling yourself REF! would've made me angrier.

Jul 31, 2017

Ratul, nice one.

Jul 31, 2017

Ratul, nice one.

Jan 12, 2010

how many zeros are in 37!

if you know the answer explain why, if you don't guess explain your logic.

Jan 13, 2010
LadyEva:

how many zeros are in 37!

if you know the answer explain why, if you don't guess explain your logic.

I don't know if this is correct, but what I'm thinking is:

Numbers that are a factor of 5 add a 0 to the end. In 37!, these numbers are:
35, 30, 25, 20, 15, 10, 5
Which adds up to 7. However, 25 is a factor of 5 twice (25/5=5), sa it will add two zeros.

So I'd say a total of 8 zeros...?

Jul 31, 2017

can you PLEASE buy the technical guide?

walk me thru a dcf (know all aspects, how to calc wacc, capm, terminal value, fcf, etc. Also know things like if you increase A/R how does that affect your fcf, if you issue debt how does that affect wacc, etc)

any accounting question like how does deprec expense of 10 affect all statements

--
"Those who say don't know, and those who know don't say."

Jul 31, 2017
nutsaboutWS:

can you PLEASE buy the technical guide?

walk me thru a dcf (know all aspects, how to calc wacc, capm, terminal value, fcf, etc. Also know things like if you increase A/R how does that affect your fcf, if you issue debt how does that affect wacc, etc)

any accounting question like how does deprec expense of 10 affect all statements

I spent my last 20 dollars on the behavioral guide.

Jul 31, 2017

dude you gotta use search man...

Jul 31, 2017

search google please

May 6, 2013

wow

Jul 31, 2017
afalcon10:

wow

im trying my best

Jul 31, 2017

someone send him the guide. how about vault its fkn free. pm me ill send u vault

--
"Those who say don't know, and those who know don't say."

Jul 31, 2017

i probably will just buy it soon.

Jan 13, 2010

35 / 5 = 7
7 /5 = 1 with remainder

1 + 7 = 8

Jan 13, 2010

Wait shit I did that wrong its like 29 i think

Jan 13, 2010

^ ?

"I wanna Thank the Good Lord for Making me a Capitalist"

Jan 13, 2010

Assuming LadyEva meant how many 0's at the end of 37!, you're both right (except for 29, did you go out and smoke something after your first response?)

basic premise is that 2*5 = 10

37/5 = 7 factors of 5
37/25 = 1 second factor of 5

so 8 factors of 5, and there more than 8 factors of 2 (37/2 > 8), so there's 8 zeros

Jan 12, 2010

I believe it was the following serie, 1^2, 2^2, 3^2 etc.
The question was however more complicated with additional inputs which I cannot remember anymore.

Apr 21, 2011

I got asked this question once for an interview @ goldman (didn't get the job), but I found the question and answer here:

http://www.programmerinterview.com/index.php/puzzl...

Apr 21, 2011
jporter892:

I got asked this question once for an interview @ goldman (didn't get the job), but I found the question and answer here:

http://www.programmerinterview.com/index.php/puzzl...

very interesting. I can see how this would be EXTREMELY USEFUL on the job lol

Sep 19, 2018

Five rings capital - estimate the number of fish in the sea