Investment banking work requires a lot of financial modelling and valuation. IBs spends a lot of time in Excel, building financial models and using various valuation methods tk advise their clients and complete deals.
To ace an Investment Banking interview you need a very strong preparation along with some skills like financial modelling, valuation etc.
Here we have compiled interview questions generally asked for this role :
1. What is cheaper - debt or equity? Justify your answer.
2. How is cost of equity and cost of debt calculated?
3. What do you understand by deferred Taxes and how do they arise?
4. If you have with you Enterprise value and equity value both of a company, what would you pay more attention and why?
5. Can a Company have negative Enterprise value and negative Equity value? If yes how.
6. Is shareholder's equity and equity value the same thing? If not what's the difference.
7. What is generally used as a discount rate? And how that rate is calculated?
8. Why do we have to un-lever and re-lever beta?
9. Which company would have a higher beta : A manufacturing company or a technology company?
10. What do you understand by terminal value?
11. How can you calculate cost of equity eithout CAPM model?
12. Differenciate between merger and acquisition.
13. How will you differenciate Goodwill and other intangible asset
14. Define Synergy
15. Which method would company use to buy other company - cash, stock or debt. Assuming all else are equal.
16. What is leveraged Buyout?
17. If you had to review only one statement then which you you use to review overall health of a company?
18. Name key Financial Ratios for appraisal and evaluation
19. What is the difference between accounts receivable and deferred revenue?
20. Why is goodwill impaired?
21. Differenciate LIFO and FIFO.
22. A company has had positive EBITDA for the past 10 years, but it recently went bankrupt. How could this happen?
23. How long usually it take to collect accounts receivable?
24. What is indicated by negative working capital?
24. Why is income statement not affected by changes in inventory?
25. Depreciation being non-cash expense how can affect cash balance.
26.What are the benefits of a company getting listed on an exchange?
27. How do you value a Company?
This question, or variations of it, should be answered by talking about 2 primary valuation methodologies: Intrinsic Value (discounted cash flow valuation), and Relative Valuation
28. What is the appropriate discount rate to use in an unlevered DCF analysis
29. How would you calculate beta for a company?
30. How do you calculate unlevered free cash flows for DCF analysis?
Free cash flows = Operating profit (EBIT) * (1 –tax rate) + depreciation & amortization – changes in net working capital – capital expenditures
31.Two companies are identical in earnings, growth prospects, leverage, returns on capital, and risk. Company A is trading at a 15 P/E multiple, while the other trades at 10 P/E. which would you prefer as an investment?
Note:1. Only the technical questions has been touched upon; apart from these, you would also have to prepare for the personal questions like why investment banking etc. and brain teasers which are usually part of testing the candidates.
2. Questions generally Asked to CA freshers are into basic ones. You should also go through Financial Due Diligence Interview Preparation.
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