Investment Banking Interview Questions

For securing an Investment Banking job at a good package, it is extremely important to crack the interview in an excellent manner and leave an extraordinary impression on the interviewer. Interview consists of case study or an assignment round and personal face to face discussion round.

And unlike other finance interviews, Investment Banking Interviews are more in depth and candidates find it difficult to crack the interview questions because of the following reasons:

• Diversity of questions asked (Questions are asked from varied topics, basically from anywhere and everywhere from finance concept)
• Intensity of the questions asked (One topic can be questioned in a detailed manner)

Here, in this article, I have created a list of questions which interviewers usually ask while hiring for an entry level profile of Investment Banking. There are multiple skills on which the interviewers test an individual and I will be covering majority of those skills in this article.

Major Questions asked in an interview of Investment Banking Job Profile

 1. Personal/ background Questions:

Primarily, any interview in Investment Banking starts with questions related to personal/ personal background questions in order to gauge the basic understanding of the candidate. These questions are asked to judge the attitude and personality of an individual towards life and his/ her career. This serves as a first step in the interview and defines the whole direction, structure and timing of an interview

These questions include:

1. Brief on your education and experience?
2. What are your strengths and weaknesses?
3. What is your family background?
4. What is unique about you?
5. What do we consider you for this job?
6. What are your best skills?
7. Do you prefer to work independently or as a team?
8. Rate yourself in the following skills – Excel Skills, Powerpoint Skills, PPT Skills, Team Building Skills, Analytical Skills, Communication Skills, Interpersonal Skills, Stress handling skills etc.

2. Finance related Questions:

This is the major part of the overall interview process and interviewer usually asks questions from any topic related to finance which may vary from ratios to cash flows and from company’s financial statement analysis to finance statements’ preparation.

These questions include:

1. What is the structure of Statement of Profit & Loss, Balance Sheet and Cash Flows Statement?
2. What do you mean by liquidity ratios, solvency ratios, profitability ratios?
3. What is debt equity ratio, ROE, ROCE, ROA, Net Margin, EBITDA Margin, Assets Turnover, financial leverage etc.?
4. What is Dupont Analysis, how is it helpful in determining ROE?
5. What is the difference between net profit, cash flow from operating activities and cash profit?
6. What all numbers will you consider while looking at a financial position of a company?
7. As an equity investor, which are the most important ratios that you will calculate before making investment decisions?
8. What is working capital and how will you calculate working capital days?
9. What are the ways to projects revenue of a company?

3. Financial Modelling and Valuation related Questions:

Investment Bankers spend hundreds of hours on building financial models and conducting valuations of multiple businesses. Thus, Interviewers expect candidates to have some knowledge of financial modeling and valuations which they test either from an assignment or from direct interview questions.

Generally the questions include:

1. How will you forecast revenue/ turnover of a company?
2. What is the process of making financial models?
3. What are the different types of financial models prepared by the Investment Bankers?
4. Draw a projected Profit & Loss account of a company based on its past numbers.
5. Explain the valuation techniques in detail.
6. What is the difference between relative and absolute valuation?
7. How do you compute valuations through trading and transaction comparable?
8. Explain a rough DCF Valuation Model.
9. How do you compute discounted cash flows?
10. What are free cash flows?
11. What is difference between cash flows at the end of the year and free cash flows?
12. What is difference between FCFF and FCFE?
13. What is the formula of FCFF and FCFE?
14. Explain CAPM model in detail.
15. What is WACC and why do you compute it?
16. What will be the impact on WACC if there is high debt in the company?
17. What do you mean by Beta? And, how do you calculate Beta?
18. What is the difference between levered and unlevered Beta?
19. What is terminal value?
20. How will you compute growth rate (g) while calculating terminal value in cash flows?

4. Resume Questions:

Another key question type is to ask questions directly from the resume objecting certain points. This usually happens in HR interview and they are restricted to asking questions on resume and personality.

These questions might include:

1. Can you walk me through your resume?
2. Specific questions on your educational background; For example; if you have done CFA or CA then the interviewer will ask curriculum related questions of CFA or CA
3. Specific questions on your interests and hobbies
4. Specific questions on certifications/ courses

Note: The questionnaire list is totally inclusive and not exhaustive