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Investment banking interviews are often very technical, testing you on financial concepts not taught in the classroom. The Finance Interview Coach Resources page was created to offer candidates with additional resources to assist in preparing for their interview.

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Walk me through an accretion-dilution analysis / merger model.

Make transaction assumptions: consideration (cash, debt, or equity), transaction fees, synergies, etc. Combine income statements of the acquirer and target Adjust income statement and shares outstanding accordingly to financing terms Add after-tax synergies Adjust for additional expenses (transaction fees) Add additional shares Subtract forgone interest on cash Subtract additional after-tax interest expense on debt Calculate [...]

Walk me through an LBO model.

Understand the company and make assumptions Transaction assumptions: entry / exit multiple, debt assumptions Operating assumptions: revenue growth, margins, capex, etc. Create sources and uses tables Calculate initial required equity, which is the plug to make total sources equal to total uses Sponsor equity = total uses - debt raised - other sources of capital [...]

How would an increase in net working capital affect your DCF? What does that mean?

An increase in net working capital would decrease unlevered free cash flow. It represents more money being tied up in the daily operations of the business. For example, an increase in inventory would tie up more cash.

What are the key differences between senior debt and junior debt?

Senior debt is typically provided by banks and has a higher priority claim on assets and cash flows than junior debt. Given this higher priority, senior debt is safer and features a lower interest rate. The interest rate is based on a floating rate, which is a benchmark rate (typically 1-month SOFR) plus a 400-600 […]

If you could only use 1 financial statement with 5 years of data, but were given information about dividends, share buybacks, and equity issuances, which would you use to evaluate an investment?

We should use the balance sheet if we have at least two years of data, as well as dividend information, share buybacks, and equity issuances. This is because you can effectively figure out the changes in cash flow and net income by comparing this year’s balance sheet with the previous year’s balance sheet. The change […]

What’s your favourite Excel shortcut?

A common answer to this would be any special paste functions, since they are commonly used in banking. For example, after copying a series of cells, you can use the special paste function to paste only the format, or the numbers as an absolute value, or column widths. Any other shortcut is fine as long […]