Investment Banking interview Guide PDF
If you could use only one financial statement to evaluate the financial state of a company, which would you choose?
Sample Answer: "I would want to see the Cash Flow Statement so I could see the actual liquidity position of the business and how much cash it is using and generating. The Income Statement can be misleading due to any number of non-cash expenses that may not truly be affecting the overall business. And the Balance Sheet alone just shows a snapshot of the Company at one point in time, without showing how operations are actually performing. But whether a company has a healthy cash balance and generates significant cash flow indicates whether it is probably financially stable, and this is what the CF Statement would show."
How do you value a private company?
Sample Answer: "You can value a private company with the same techniques you would use for a public company but with a few differences that make it more difficult. Financial information will likely be harder to find and potentially less complete and less reliable. Second, you can't use a straight market valuation for a company that isn't publicly traded. In addition, a DCF can be problematic because a private company won't have an equity beta to use in the WACC calculation. Finally, if you're doing a comps analysis using publicly traded companies, a 10-15% discount may be required as a 10-15% premium is paid for the public company's relative liquidity."
When should a company issue equity rather than debt to fund its operations?
Sample Answer: "There are several reasons for issuing stock rather than debt. First, if a company believes its stock price is inflated, issuing stock can raise a lot of capital relative to the ownership sold. Second, if the projects to be funded may not generate predictable cash flows in the immediate future, the company would want to avoid the obligation of consistent coupon payments required by the issuance of debt. Issuing stock is also an effective way to adjust the debt/equity ratio of a company's capital structure or to monetize the owners' investment. "
What are you looking for in this job?
Sample Answer: "I am going into this as an unparalleled learning experience. Everyone I have spoken with in the industry tells me you learn everything on the job. While my undergraduate studies prepared me for business, I know that most of the skills I need will be acquired on the job. I understand the hours and the workload, and I want to work incredibly hard to gain real world experience that isn't available in any other profession at this stage in my career. I know these skills will prepare me for anything I want to do later in my career."