Wednesday, November 29, 2023

Investment Banking First Round Interview

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What Is Beta And Why Would You Unlever It

Investment Banking First Round Interview

Beta, symbolized by the Greek character ,is an estimate of how volatile a security is compared to the overall market . The baseline for beta is 1.0, so anything above 1.0 is more volatile and holds more inherent risk.

It is best to use an unlevered beta when comparing a company that is not on the market yet. Additionally, because unlevered beta does not consider debt, it allows you to see the volatility of the companys equity alone as if the company had not taken on any debt.

Onto The Interview Itself

My first question is generally “what is an investment bank?” Someone who can’t answer this question is an auto-ding. A lot of candidates try to “wow” the interviewer and over complicate things… this is pretty simple answer and the best way to wow an interviewer is with a short, pithy and simple answer. So what is an investment bank? “Its a financial institution that essentially creates markets by connecting buyers and sellers, and risk and capital. At a very high level, there is a sales and trading business and an investment banking business. And from what I understand, the investment banking division is structured into products and industries .” Thats an A answer, IMO.

Next you’ve established you know what banking is, why do you want to do it? Why do you want to do it at JPMorgan, GS, CS, Jefferies? The answer is not “because JPM is one of the best banks on the street.” It should be well thought out and as much as possible unique to the bank. What I always did was network within that bank before my interview and re-gurgate the same answers I got when I asked my contacts why they joined that bank. Most banks have a few one liners on why they are special… be smart and know how to use those to your advantage. DO NOT read off Goldman Sachs top 10 principles as the reasons you want to work at GS. Do use one of the less cheasy one of those to put in your own words a theme you can say you’ve observed that sets them apart and makes you want to work there over other banks.

Ib Interview First Impressions

We’ve all heard about it at one point or another. Forbes has on it.“First impressions are the best impressions.”

Within just a few seconds of meeting, people will form a solid opinion of who you are. Perfecting your first impression while carrying yourself with a healthy balance of confidence and humility lays the foundation and tone for the rest of the interview. The following section has been written by Patrick Curtis, CEO of WallStreetOasis, based on his vast experience of interviewing candidates for investment banking positions.

Read it over, perfect your entry and learn how to leave a lasting impression on your interviewer from the get-go.

Recommended Reading: How To Be Good In A Job Interview

First Round: Phone Interview

The Investment Banking Phone Interview is the second phase of the Non-Core Recruiting Process. Congratulations if you have landed a first round interview as it is the most difficult part of the non-core interview process. You should now feel more confident, because your resume was selected from among thousands of other hopefuls.

The next step is being successful in your first-round phone interview. Phone interviews are done for both internship recruiting and full-time recruitingâall candidates will have to go through them, with the exception of core recruiting candidates who typically meet with the bankers on-campus for first rounds.

So how does one do well in them? Its quite simple: preparation, preparation, and more preparation. If you are entirely ready for the questions that will be asked, you should do very well. We at Street of Walls know these questions well, and they will help you stand out in the process they will be discussed in a moment.

The First Round is generally less technical than the Final Round , and is primarily used to gauge the personality and cultural fit of potential candidates. If the candidate can hold a casual conversation with the interviewer while simultaneously showing that he or she wants the job more than other candidates, he or she will do very well.

Here is a sample of questions that interviewers are very likely to ask in First Round interviews. A more detailed review of investment banking behavioral questions are described in Chapter 7.

Example Dcf Questions In Investment Banking Interviews

Step by Step Instructions To How To Network For Investment Banking ...

The DCF is real valuation multiples are just abbreviated ways to express it.

So, you can expect questions on everything from the basic idea to a walk-through to the Discount Rate and Terminal Value calculations.

QUESTION: Explain the big idea behind a DCF analysis and how it is used to value a company.

ANSWER: A DCF is an expansion of this formula:

Company Value = Cash Flow / , where Cash Flow Growth Rate < Discount Rate

The problem is that that formula assumes the companys Discount Rate and Cash Flow Growth Rate never change but in real life, they keep changing until the company reaches maturity.

So, in a Discounted Cash Flow analysis, you divide the valuation into two periods: One where those assumptions change and one where they stay the same .

You then project the companys cash flows in both periods and discount them to their Present Values based on the appropriate Discount Rate.

Then, you compare this sum the companys Implied Value to the companys Current Value or Asking Price to see if its valued appropriately.

QUESTION: Walk me through an Unlevered DCF.

ANSWER: You start by projecting the companys Unlevered Free Cash Flows over the next 5-10 years by making assumptions for revenue growth, margins, Working Capital, and CapEx.

Unlevered FCF excludes all financing and non-core-business activities and equals EBIT * + D& A +/- Change in Working Capital CapEx.

Get more on Unlevered Free Cash Flow in our YouTube channel.

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How To Carry Yourself

  • The biggest thing I am looking for is humble confidence – someone I would like to grab a beer with.
  • Listen, listen, listen!!! So many mistakes happen just because of not listening carefully and not being in the moment.
  • Be punchy, brief, and learn how to end a sentence. I can’t tell you how many times people have gotten into trouble by rambling off into some ass-backward irrelevant tangent. Learn to be comfortable with a little silence here and there while we absorb your answer.

When Calculating Enterprise Value Do You Use The Book Value Or The Market Value Of Equity

Sample Answer:You should use the market value of equity always because the book value is not adjusted once it is recorded in the books at the time of issue of the shares. It is common to very often see a share priced in the hundreds or thousands having a face value of $1 or $10. This is due to the historical nature of accounting. Hence, the book value of equity is useless for any kind of valuation, and market value is the preferred metric to use.

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How Do You Ace Investment Banking Superday

Top 10 tips for a successful SuperdayRehearse your answers to the most common investment banking interview questions. Research the bank and understand what makes them unique, the deals they’ve worked on, and their culture. Network with professionals at the bank before and during the event as much as possible…. read more

Investment Banking Interview Questions Category : Technical Questions And Answers

Investment Banking Interview Preparation

For this last category, I do not have any magical tips that will get you results in hours instead of weeks or months.

Put simply, to succeed in investment banking interviews, you need to put in the time to study accounting, finance, valuation, and M& A and LBO modeling.

If you dont, you wont have a great chance against candidates who are obsessed about becoming an investment banker and have spent months preparing.

We cover all these topics comprehensively in our full Investment Banking Interview Guide, but you can also get good introductions to them in our YouTube channel and the articles on this site:

With limited time, focus on accounting, equity value and enterprise value, and valuation and DCF analysis. They are the most common topics, especially in entry-level interviews.

There are thousands of possible questions to test your technical knowledge, so I will list a few representative examples in each of the main categories.

I will focus on questions and answers that you probably havent seen on other sites and other resources, so most of these are in the more challenging range:

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Example Valuation Questions In Investment Banking Interviews

You need to understand the big picture behind valuation, how Equity Value and Enterprise Value differ, and the trade-offs of different multiples and methodologies.

Questions like How do you value a company? or Tell me the 3 basic valuation methodologies are so basic that banks almost assume you already know them.

QUESTION: What do Equity Value and Enterprise Value mean, intuitively?

ANSWER: Equity Value is the value of ALL the companys Assets, but only to EQUITY INVESTORS .

Enterprise Value is the value of only the companys core-business Assets, but to ALL INVESTORS .

For more, please see our tutorial on how to calculate Enterprise Value.

QUESTION: A company issues $200 million in new shares, and then it uses $100 million from the proceeds to issue Dividends to shareholders. How do Equity value and Enterprise Value change in each step?

ANSWER: Initially, Equity Value increases by $200 million because Total Assets increases by $200 million and the change is attributable to common shareholders.

Enterprise Value stays the same because Cash is a non-core-business Asset you can also say that the increases in Cash and Equity Value offset each other in the Enterprise Value formula.

In the next step, Equity Value decreases by $100 million because Cash, and therefore Total Assets, falls by $100 million and this change is attributable to common shareholders.

For more on this topic, please see our guide to EBIT vs. EBITDA vs. Net Income

What Happens At First Round Investment Banking Interview

General rule in a first round investment banking phone interview is that you can’t miss any technical questions that arise. Typically bankers like to ask at least one technical question to gauge that you have done your homework. They usually aren’t the hardest questions but you should be prepared to answer them…. read more

Common First Round Interview Questions and How to Answer

  • Where do you see yourself in 5 years? …
  • What is your greatest weakness? …
  • Why did you leave your last job? …
  • Why should we hire you? …
  • Tell me about your greatest accomplishment.

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Example Accounting Questions In Investment Banking Interviews

You dont need to know accounting in terms of debits and credits, but you do need to know the 3 main financial statements and how they link together very well.

QUESTION: How do the 3 financial statements link together? Assume the Indirect Method for the Cash Flow Statement.

ANSWER: To link the statements, make Net Income at the bottom of the Income Statement the top line of the Cash Flow Statement.

Then, adjust this Net Income number for any non-cash items such as Depreciation & Amortization.

Next, reflect changes to operational Balance Sheet items such as Accounts Receivable, which may increase or decrease the companys cash flow depending on how theyve changed.

That gets you to Cash Flow from Operations.

Next, reflect investing and financing activities, which may increase or decrease cash flow, and sum up Cash Flow from Operations, Investing, and Financing to get the net change in cash at the bottom.

Link Cash on the Balance Sheet to the ending Cash number on the CFS, and add Net Income to Retained Earnings within Equity on the Balance Sheet.

Then, link each non-cash adjustment to the appropriate Asset or Liability SUBTRACT links on the Assets side and ADD links on the L& E side.

Link each CFI and CFF item to the matching item on the Balance Sheet, using the same rule as above.

Check that Assets equals Liabilities + Equity at the end if this is not true, you did something wrong and need to re-check your work.

M& i 400 Investment Banking Questions Guide Vs Wsp’s The Investment Banking Interview Guide Vs Wso’s Investment Banking Interview Prep Course

Investment Banking Interview Process &  Superday

One question we receive a lot from students and professionals alike, given the many courses flooding the market, is which interview course is the best in the industry for breaking into investment banking.The following table and comparison present a comparison between the top three resource providers: the Wall Street Oasis , WallStreetPrep , and Mergers & Inquisitions . This comparison explains why we believe WSO’s IB Prep Course remains the gold standard in the industry, with features unmatched by competitors.


With that being said, WSO leads the industry for IB recruiting as the IB prep course gives you access to thousands of interview insights by actual candidates all across the world across a variety of divisions in finance. The advantages and insights gained by this are simply unmatched by our competitors, and we believe you’ll feel the same way as us once you’ve got our guide as well.

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Walk Me Through Your Background/resume

Dial-in a cohesive 90-second resume walkthrough that focuses on the positive and motivating factors behind every transition . A good example:

I went to school to learn how to design cars, but after my first internship I realized that I like interacting with clients directly and pursued full-time roles in B2B sales. In these sales roles, I developed solid selling skills as well as gained exposure to a, b, and c. Since I wanted to continue honing those skills and branch out to focus on x, y, and z, I am seeking a new role/promotion which provides that opportunity

Be deliberate. Every move you made should have a reason . Don’t be negative. Never say you left because you were bored or “wanted to try something new.”

How Would A $10 Increase In Depreciation Expense Affect The Three Financial Statements

Sample Answer:In the income statement, the depreciation increase of $10 is set off by a reduction of $4 on taxes as depreciation is a tax-deductible expense for the net reduction in net income of $6. In the cash flow statement, net income is reduced by $6, depreciation is increased by $10, net cash from operations and total cash is increased by $4. This increase in cash is because depreciation is a non-cash expense that has no impact on cash while the reduction in taxes affects the cash flow. In the balance sheet, property, plant, and equipment balances reduce by $10, cash balance increases by $4, and retained earnings reduce by $6 due to the reduction in net income.

The following points summarize this:

On the income statement

  • $10 depreciation expense, 40% tax rate
  • Reduction in net income of $10 x = $6

Reduction in net income flows to cash from operations

  • Net income reduced by $6
  • Depreciation increases by $10
  • Net increase in cash from operations of $4
  • Ending cash increases by $4

Ending cash flows onto the balance sheet

  • Cash increases by $4
  • Property, plant, and equipment lose $10 in value
  • Net decrease in assets of $6, matches the net drop in shareholder equity due to the reduction of retained earnings from the $6 is net income

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Investment Banking Associate Interview Experience

This is a detailed breakdown of the actual interview questions for an investment banking Associate position at a global investment bank. Any references to names of people, universities, banks, or cities have been removed to keep the information anonymous. This individuals investment banking associate interview experience went down as follows

The Investment Banking Interview Process

How to Pass the Investment Banking Superday (Final Round Interview)

The overall process of completing interviews varies based on your location and the level of roles youre applying to .

If youre in North America and youre applying to Analyst roles, the investment banking interview process usually goes like this:

  • Network months in advance and submit your application online.
  • Complete a HireVue or other pre-recorded video interview, or possibly a phone interview with a human.
  • Then, come into the banks office for a Superday, where you interview in-person with many bankers at all levels .
  • If you get an offer, youll hear back quickly if not, they may not say anything, or they may drag out the decision.

    At the MBA level , its similar, but banks tend to focus on on-campus recruitment at the top business schools.

    If youre applying outside of these formal processes for example, youre working at a Big 4 firm or valuation firm and you apply for full-time IB roles then the process will be a series of interviews over a long period, with unpredictable timing and less reliance on HireVue and other automated assessments.

    For more, see our HireVue interview guide.

    Real interviews are far more challenging because they could ask you anything, and theyll judge not only your responses but also your body language and cultural fit with the group.

    In Europe, and especially the U.K., this process is different because:

  • You will have to complete online math, logic, and verbal tests, along with competency questions and
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    Prepare A Unique Answer To The Why Firm X Question

    First, you should outline and rehearse an answer to the why Firm X? question. This is the single most common question asked in investment banking interviews, so its essential that you do this at some point during your preparation anyway.

    When you begin to outline your answer, you should be very intentional to give UNIQUE reasons for wanting to work at your target firm. To be clear, that means the reasons you give should be things that ONLY apply to that particular firm.

    One good reason to include, are the names of current or former employees of the firm who you know, and what impact theyve had on you. This is a powerful technique because it is naturally firm-specific, and it makes a real personal connection between you and someone at the company.

    To get some more ideas of what to include in your answer, check out the sample answers for this question that weve written for each of the below firms:

    Given that were talking about investment banking roles, you may also want to get a general feel for the financial statements of your target firm, which are easy to find online for any publicly traded investment bank. This is probably not strictly necessary though, so prioritize other preparation steps first.

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