We have a fairly exhaustive interview guide that is one of the most popular pages on our website. If you can answer all of those questions, you can be fairly assured of a position – summer, co-op or full time at most Bulge Brackets or Canadian banks assuming that you are not that socially awkward.
However, we are aware that for new readers, they can be overwhelming and given the quantum of content presented many questions are superfluous to requirements for performing sufficiently during recruiting – so we are putting together a hack guide of questions that you can expect for most interview processes.
We have been through close to a hundred interviews on both sides of the table and the standard full interview would include a section with two associates grilling on technical questions. These questions or some variant come up in 90% of cases and mastery of them is usually good enough.
So, lucky you! If you are entering your third year at Rotman and suddenly want to get into investment banking after not knowing what to do with your life and then subsequently attending a student conference right before recruiting, we are your best friends. You will make money $$$
As the post title implies, you should be able to run through these in 30 minutes. Much faster if you are a pro like me.
1. If you had 1 out of the 3 financial statements to make an investment decision, which one would you choose?
2. If I substituted an operating lease for a capital lease, what happens to EV/EBITDA?
3. Walk me through what happens when a company sells $10 worth of goods on credit through the three statements.
4. A company buys a $100 building using 50% debt at an interest rate of 10%. Depreciation is straight-line for 10 years, walk me through the three statements at t=0 and t=1.
5. Would you rather have a 10% bump in revenue or a 2% bump in net income?
Valuation and Cost of Capital
1. Walk me through a DCF (a very long question with multiple follow up questions on WACC, CAPM)
2. What are some ways to value a company?
3. What are some strengths and weaknesses of the DCF, comparables and precedent transactions?
4. What is a sum of the parts analysis?
5. Pitch me a stock/short – why is it over/undervalued?
Mergers & Acquisitions
Accretion/Dilution questions – we have an extensive 4 part series here
1. If a company trading at 10x price/earnings purchases another company at 5x price/earnings is it accretive or dilutive to earnings? What are we assuming?
2. Company A (8x) purchases company B at 10x using 50% debt and 50% equity – is it accretive or dilutive? (ask about the cost of debt and the tax rate as it is an after-tax cost of debt)
3. Company A (10x) purchases company B (5x) – what premium could it pay to make the transaction break even?
4. Company A (8x) purchases company B (10x) – what is the dollar value of synergies that needs to be realized for this transaction to be accretive?
5. A transaction is accretive. Is it a good transaction?
1. What is an acceptable IRR?
2. Assuming same maturity, coupon, seniority – everything except amortization schedule (and effectively duration), would you rather have a term loan A or B as the financial sponsor?
3. What factors drive IRR/what are some levers you could pull to increase IRR?
4. What is a dividend recapitalization?
5. What are sources of capital for an LBO? (revolver, bank debt, term loan, high yield bonds, subordinated debt, mezzanine/PIK, preferred shares, equity, management equity with ratchet)
Markets and Investing
1. What industry would you invest in right now?
2. Where is the S&P 500? What has happened over the last 6 months? What will happen in the next 3/6/12 months? (substitute with oil, other equity index, currency)
3. What is going on with interest rates right now and what does it mean for the economy?
4. Tell me a few interesting stories you have read in the news lately. What is your take?
5. What company would you short? Why?
Is This Good Enough for Investment Banking?
Are you interviewing for an elite boutique – Centerview, Evercore, Moelis, PJT? These questions will just scape the surface – but you would probably be far more prepared beforehand if you were selected for an interview. Our full guide even may not be enough.
For a summer or co-op, anything beyond this usually means that someone is a jerk – either the interviewee or an interviewer.
You would be surprised – a few times when interviewing candidates from a particular school (Queens), the interviewee was set on showing that they knew everything and possibly more than the interviewers.
You also get candidates from Ivy Leagues that like to stress “At Wharton, we did _____” at the beginning of every sentence.
The worst ones are “uh, yeah… I went to Williams College… it’s not a bad school in the US, a little small though.” And now you are going to not get a job at Scotia – you must be the dumbest guy who ever attended Williams!
These guys end up getting the hardest questions – sometimes made up ones. None of them get them right and some get angry and accuse us of being wrong. There is no substitute for being run over by a train for weeks on end in terms of learning in investment banking, so stay humble if your only relevant work experience is calculating sharpe ratios for a summer at an asset management job your father provided for you.
On the other hand, there are some analysts or associates that just like to see candidates sweat. They may not necessarily be the best people to work for. There is a fine line, however, between someone who wants to see the extent of your curiosity and corporate finance knowledge and someone with a chip on their shoulder.
These guys are at all banks and financial institutions across the size spectrum have their fair share of jerks, but at least in my experience, this seems to be more common at smaller shops. As such, if you are getting grilled by someone at any bank that no one brags about joining and the interviewing environment is hostile consider not accepting an offer if you have other options.