M&A, coverage and capital markets. The classic technical + fit gauntlet: accounting, valuation, DCF, M&A and LBO, plus "walk me through your CV".
A sample of the Investment Banking bank: the first 3 questions of every topic, with the model answers. 576 questions in total.
96 questions in this topic
Income statement shows profitability over a period (revenue → net income). Balance sheet is a snapshot of assets = liabilities + equity at a point in time. Cash flow statement reconciles net income to the actual change in cash across operating, investing and financing. They link: net income flows to the top of cash flow and into retained earnings on the balance sheet; ending cash on the CF is the cash line on the BS.
Income statement: pre-tax income falls $10, tax falls $3.50, net income falls $6.50. Cash flow: net income −$6.50 but add back $10 of non-cash depreciation → cash up $3.50. Balance sheet: cash up $3.50 (asset), PP&E down $10 (asset) → assets down $6.50; retained earnings down $6.50 (equity) → balances.
Working capital = current assets − current liabilities (operationally: receivables + inventory − payables). An increase in working capital consumes cash (you have funded more receivables/inventory). It matters because a "profitable" company can still run out of cash if working capital balloons; in a DCF, changes in working capital adjust unlevered free cash flow.
93 more questions on Accounting, with model answers, inside.
59 questions in this topic
Intrinsic: DCF. Relative: comparable companies (trading comps) and precedent transactions. Others: LBO analysis (a floor value from a sponsor's perspective), sum-of-the-parts, and for some assets dividend discount or replacement cost. You triangulate, no single method is "right".
Usually precedent transactions, because acquirers pay a control premium and often expect synergies, which inflate the multiples paid versus where standalone public companies trade. Exceptions occur in frothy markets or distressed deals.
Multiples reflect expected growth and risk, not just current margins. A lower-margin peer growing much faster (or with more durable growth, lower capital intensity, or better returns on capital) can command a higher multiple. Margin is one input; the multiple prices the future.
56 more questions on Valuation, with model answers, inside.
41 questions in this topic
Project unlevered free cash flow (EBIT×(1−tax) + D&A − capex − change in NWC) for ~5 to 10 years. Discount them and the terminal value at WACC. Terminal value via Gordon growth (final FCF×(1+g)/(WACC−g)) or an exit multiple. Sum the present values to get enterprise value; subtract net debt for equity value, divide by shares for per-share value.
Unlevered FCF is the cash available to all capital providers (before financing), so you discount it at WACC, the blended required return of all providers. Mixing levered FCF with WACC (or unlevered FCF with cost of equity) double-counts or mis-prices the capital structure.
Both hit the terminal value hardest, and the answer depends on the spread (WACC − g). Because TV ≈ FCF/(WACC − g), when WACC and g are close the value is very sensitive to both; a 1% move in either can swing the valuation materially. Terminal value often drives the majority of the DCF, so scrutinise those assumptions.
38 more questions on DCF, with model answers, inside.
75 questions in this topic
Compare the acquirer's standalone EPS to pro-forma EPS after the deal. Pro-forma net income = acquirer NI + target NI + after-tax synergies − after-tax new interest (if cash/debt funded) ± adjustments; pro-forma shares increase if stock is issued. If pro-forma EPS > standalone, the deal is accretive; if lower, dilutive.
Roughly, an all-stock deal is accretive when the acquirer's P/E is higher than the target's P/E (the acquirer's "currency" is more expensive than what it's buying). If the acquirer P/E is lower, it's dilutive. Synergies and premium paid shift the breakeven.
Cash: signals confidence, no dilution/ownership change, cheaper today when debt/cash yields are low, and usually accretive, but uses balance-sheet capacity and adds risk. Stock: preserves cash and shares risk/reward with target holders, useful when the acquirer's shares are richly valued or the deal is large, but dilutes ownership and can signal the stock is overvalued.
72 more questions on M&A, with model answers, inside.
43 questions in this topic
Three levers: (1) deleveraging, using the company's cash flow to pay down debt grows the equity slice; (2) EBITDA growth, revenue growth and margin improvement; (3) multiple expansion, exiting at a higher multiple than entry. Leverage magnifies equity returns because a fixed amount of value creation sits on a smaller equity base.
Entry: EV = entry EBITDA × entry multiple; split into debt and sponsor equity. Project EBITDA growth and free cash flow; use FCF to pay down debt each year. Exit: EV = exit EBITDA × exit multiple; subtract remaining net debt for exit equity. IRR from equity in vs equity out over the hold (MOIC = exit equity / entry equity; IRR ≈ MOIC^(1/years) − 1).
Stable, predictable cash flows (to service debt), low capex and working-capital needs, a strong market position and margins, clear cost or growth levers, hard assets or contracted revenue to support leverage, and a credible exit. Cyclical, capital-hungry or declining businesses are poorer fits.
40 more questions on LBO, with model answers, inside.
60 questions in this topic
Tie it to genuine motivations: exposure to how companies are valued, financed and transacted; a steep learning curve and responsibility early; working on high-stakes, intellectually varied problems with smart people; and a foundation for a career in finance. Anchor it to a specific experience (a deal you followed, a project, a spring week) rather than clichés about "hard work".
A 60 to 90 second narrative, not a read-through: where you started, the 2 to 3 decisions/experiences that built toward finance, what each taught you, and why that leads logically to this role now. End on why this firm/team. Practise it until it's smooth but not robotic.
Use STAR: Situation, Task, Action, Result. Pick a real, specific example, focus most of the answer on your Actions (what YOU did), and finish with a concrete, quantified result and a reflection on what you learned. Avoid vague group narratives.
57 more questions on Behavioural, with model answers, inside.
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They want structured estimation, not the exact number. Approximate the cabin/usable volume of the plane, approximate the volume of a golf ball, divide, and apply a packing-efficiency haircut (~60 to 70%). State assumptions clearly and reason out loud, the process is the answer.
$0.05. If the ball is x, the bat is x + 1, so 2x + 1 = 1.10 → x = 0.05 (the intuitive "$0.10" is the classic trap). They're testing whether you slow down and check.
Fill the 5, pour into the 3 (2 left in the 5), empty the 3, pour the 2 into the 3, fill the 5 again, top up the 3 (which needs 1) leaving 4 in the 5. They want structured, stepwise reasoning under a constraint: talk it through calmly.
20 more questions on Brainteasers, with model answers, inside.
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Under the absolute priority rule, claims are paid strictly in seniority, senior secured, senior unsecured, subordinated, then equity, each made whole before the next sees a cent. The fulcrum security is the tranche where value runs out (partial recovery); it typically converts into the new equity of the reorganised company, which is why distressed investors buy the fulcrum to own the business through the back door.
Chapter 11 is reorganisation: the company keeps operating (debtor-in-possession), restructures its debts and emerges as a going concern under a plan approved by creditors and the court. Chapter 7 is liquidation: operations cease, an trustee sells the assets and distributes proceeds down the priority waterfall. You choose 11 when the business is worth more alive than dead.
Amend-and-extend (push out maturities), a debt exchange (swap old debt for new, often at a discount or into equity), a distressed buyback, raising rescue financing, or an asset sale to pay down debt. Out-of-court is faster and cheaper than Chapter 11 but needs near-unanimous creditor consent, which holdouts can block.
18 more questions on Restructuring, with model answers, inside.
13 questions in this topic
Leverage (net debt/EBITDA) measures how much debt sits on the cash flows: the size of the burden. Coverage (EBITDA/interest, or (EBITDA−capex)/interest) measures the ability to service it: whether cash flow comfortably pays the interest. A business can have high leverage but fine coverage if rates are low; both matter to a lender.
The issuer's credit rating: BBB−/Baa3 and above is investment grade; BB+/Ba1 and below is high yield ("junk"). High-yield issuers carry more default risk, so they pay wider spreads and accept tighter covenants. The ratings boundary matters because many institutions can only hold investment grade: a downgrade to junk ("fallen angel") forces selling.
Debt is cheaper (interest is tax-deductible; lenders demand less return than equity for the same firm), it doesn't dilute owners, and it imposes discipline. As long as the firm can service it, debt lowers WACC. Equity is used when leverage is already high, cash flows are volatile, or the stock is richly valued (cheap currency).
10 more questions on Credit, with model answers, inside.
28 questions in this topic
The company hires underwriters, files a registration (S-1/prospectus) with financials and risk factors, the SEC/regulator reviews, then a roadshow markets the deal to institutions to build a book of demand. Bankers set a price range, gauge demand, price the offering the night before, allocate shares, and the stock lists and trades. The bank underwrites (buys and resells) the shares.
Underwriters often price slightly below expected trading value to ensure the deal clears and to reward institutional buyers, so the stock jumps at open. Winners: the allocated institutions and the bank (happy clients, low risk). Loser: the issuing company, which "left money on the table" (a first-day pop is capital it could have raised). It's a classic principal-agent tension.
An option letting underwriters sell up to ~15% more shares than planned. If demand is strong and the price rises, they exercise it (more supply, more proceeds); if the price falls, they buy shares in the market to cover the short, supporting the price. It's a stabilisation tool that lets banks meet demand and smooth early trading.
25 more questions on Capital Markets, with model answers, inside.
30 questions in this topic
180. 12 × 15 = 12 × 10 + 12 × 5 = 120 + 60 = 180. Or 15 × 12 = 15 × 4 × 3 = 60 × 3. Decompose into friendly chunks.
504. 7 × 8 = 56, then 56 × 9 = 56 × 10 − 56 = 560 − 56 = 504. Chain simple steps and use round-number shortcuts.
12.5%. Learn the eighths cold: 1/8 = 12.5%, 3/8 = 37.5%, 5/8 = 62.5%, 7/8 = 87.5%. Fast fraction↔percentage conversion is table stakes.
27 more questions on Mental Maths, with model answers, inside.
33 questions in this topic
Have a current, specific answer: a central-bank decision, an inflation print, a major earnings or deal, a geopolitical event, and your reasoning on the market reaction, not just the headline. It proves you actually follow markets. Prepare one or two threads you can discuss with a view and handle pushback.
Know the ballpark: major policy rates, 10-year yields, key equity indices and their recent direction. It matters because rates drive deal financing costs, valuations (discount rates/multiples) and issuance windows: a banker who doesn't know whether financing is cheap or expensive can't advise. Precision to the decimal isn't needed; the direction and drivers are.
Pick a live or recent transaction: the parties, size, structure (cash/stock/mix), strategic rationale and premium, financing, and expected synergies: then your judgement: is the price justified, is it accretive, are the synergies credible, what are the regulatory/integration risks? The point is commercial reasoning and a view, not reciting the press release.
30 more questions on Markets, with model answers, inside.
21 questions in this topic
Use P/E and price-to-(tangible)-book against return on equity: a bank earning ROE above its cost of equity trades above book, below it trades below. Drivers: net interest margin, loan growth, credit quality (provisions), fee income, cost/income ratio, and capital (CET1) ratios. You can't use EV/EBITDA: debt is the raw material, not just financing.
Two lenses: NAV (mark each property to fair value, sum, subtract debt) and cash-flow multiples on FFO/AFFO (funds from operations: net income plus depreciation, the cash metric for property), plus dividend yield since REITs pay out most income. Cap rates (NOI/property value) drive property values and move inversely with the multiple. Leverage and lease duration matter.
ARR/growth, net revenue retention (>100% is excellent), gross margin, CAC payback and LTV/CAC, gross/net churn, the rule of 40 (growth% + FCF margin% ≥ 40), and magic number (sales efficiency). Value on EV/ARR or EV/revenue scaled by growth and retention. The thesis is durable, expanding recurring revenue with efficient customer acquisition.
18 more questions on Industry, with model answers, inside.
13 questions in this topic
Term Loan B: floating-rate, senior secured, held by institutional loan investors/CLOs, typically covenant-lite now, prepayable, shorter maturity. High-yield bonds: fixed-rate, often unsecured/subordinated, held by bond funds, with incurrence covenants and call protection, longer maturity, not freely prepayable. Sponsors mix them by cost, flexibility (prepayment), rate view and market appetite. TLB gives flexibility; bonds lock in fixed rates for longer.
A collateralised loan obligation pools leveraged loans and issues tranches of debt (AAA down to equity) against them, with cash flows waterfalled by seniority. CLOs are the largest buyers of institutional term loans, so their appetite drives leveraged-loan supply and pricing. When CLO issuance is strong, leveraged financing is plentiful and cheap; when it seizes, buyouts get harder to fund.
Cov-lite loans have only incurrence covenants (tested when the borrower takes an action) rather than maintenance covenants (tested every period), so borrowers get more headroom and lenders less early warning of trouble. It became standard in borrower-friendly markets with strong investor demand for yield. It benefits sponsors/borrowers and shifts risk to lenders: a key feature of the post-2010 leveraged-loan market.
10 more questions on Leveraged Finance, with model answers, inside.
8 questions in this topic
MOIC = 2.5x; IRR = 2.5^(1/4) − 1 ≈ 26%. Over 4 years, 2.5x is a strong ~26% (versus ~20% over 5 years): time matters. Use MOIC^(1/years) − 1 and know that shortening the hold lifts the IRR for a given multiple.
~17.6%. 2.25^(1/5) − 1 ≈ 0.176. Between the 2.0x (~15%) and 2.5x (~20%) anchors, as expected. Interpolating between the anchors gets you close without a calculator.
Entry and exit multiples are the same, so all the return comes from EBITDA growth. Enterprise value doubles. With no debt paydown, net debt is unchanged, so equity value rises by the full increase in enterprise value. If entry equity was 40% of a 10x purchase, equity roughly triples over five years, which is about a 25% IRR. The point of the question is that multiple expansion contributed nothing: this is a pure growth deal.
5 more questions on Returns, with model answers, inside.
12 questions in this topic
Revenue → £108m; costs → £100m × 1.12 = £112m: costs now exceed the £108m revenue, so the £20m profit... wait, if starting revenue is £120m with £100m costs (£20m profit): revenue → £129.6m, costs → £112m, profit → £17.6m (down 12%). Costs growing faster than revenue compresses profit sharply: negative operating leverage. Always check which base and rate applies.
EV/EBITDA = 2,000/250 = 8.0x. At the same 8x on $300m EBITDA, EV = 8 × 300 = $2.4bn: a $400m (20%) increase from EBITDA growth alone. It shows how EBITDA growth at a constant multiple drives enterprise value proportionally.
Share price = 600/50 = $12; EPS = 40/50 = $0.80; P/E = 12/0.80 = 15x. Two quick steps: price from equity value ÷ shares, and P/E from price ÷ EPS (or equity value ÷ net income = 600/40 = 15x directly).
9 more questions on Numerical, with model answers, inside.