A job interview at an investment bank will usually be divided into two sections.
Section one will likely be filled with technical questions and section two will involve cultural fit questions. The first round are designed to assess your competency for the role and the second are to explore whether your personal attributes align with the culture of the firm.
Let’s get started with some practice questions (and answers):
Q: If you could use only one financial statement to evaluate the financial state of a company, which would you choose?
Sample Answer: “I would want to see the Cash Flow Statement so I could see the actual liquidity position of the business and how much cash it is using and generating. The Income Statement can be misleading due to any number of non-cash expenses that may not truly be affecting the overall business. And the Balance Sheet alone just shows a snapshot of the Company at one point in time, without showing how operations are actually performing. But whether a company has a healthy cash balance and generates significant cash flow indicates whether it is probably financially stable, and this is what the CF Statement would show.”
Q: How do you value a private company?
Sample Answer: “You can value a private company with the same techniques you would use for a public company but with a few differences that make it more difficult. Financial information will likely be harder to find and potentially less complete and less reliable. Second, you can’t use a straight market valuation for a company that isn’t publicly traded.”
Q: When should a company issue equity rather than debt to fund its operations?
Sample Answer: “There are several reasons for issuing stock rather than debt. First, if a company believes its stock price is inflated, issuing stock can raise a lot of capital relative to the ownership sold. Second, if the projects to be funded may not generate predictable cash flows in the immediate future, the company would want to avoid the obligation of consistent coupon payments required by the issuance of debt. Issuing stock is also an effective way to adjust the debt/equity ratio of a company’s capital structure or to monetize the owners’ investment. ”
Q: How would you value a company with negative historical cash flow?
Given that negative profitability will make most multiples analyses meaningless, a DCF valuation approach is appropriate here.
Cultural fit questions:
Q: What are you looking for in this job?
Sample Answer: “I am going into this as an unparalleled learning experience. Everyone I have spoken with in the industry tells me you learn everything on the job. While my undergraduate studies prepared me for business, I know that most of the skills I need will be acquired on the job. I understand the hours and the workload, and I want to work incredibly hard to gain real world experience that isn’t available in any other profession at this stage in my career. I know these skills will prepare me for anything I want to do later in my career.”
Q: What makes you think you can put up with the stress, pressure, and long hours of a career in finance?
Sample Answer: “I feel I am as prepared as anyone else coming out of University to handle the long hours. In fact, when you add up all the time I spent doing all my different activities, school hours were almost as long. Every day I was up at 7:30 for classes that ran from 8:15 until 2:00. After class, I would go to work, which didn’t get me home till after 7pm. Then I would grab dinner, and work in either my room or the library until I was done, which usually wasn’t until pretty late at night or into the morning. While I know it isn’t the same stress and time commitment as finance requires, I feel my experience has left me well prepared.”
Q: What is the most intellectually challenging thing you have done?
Sample Answer: “In my internship last year, I was responsible for aggregating data my company collected and summarising it using Microsoft Excel. When I started, the analysts on the team had been doing the aggregating, manually collecting all the data, applying formulas, etc. It seemed like they were wasting a lot of time. I had a little bit of experience with VBA, and over the course of about a week, I taught myself to automate the entire process whenever new data became available. It was great that as a Summer intern I was able to implement a system that is still saving time today. ”
Why have you applied with us?
The interviewer is looking for evidence that you have done your research and know what the employer has to offer. You should have looked at all areas of the employer’s website: not just the graduate recruitment section but also the client-facing sections and probably most importantly, their press releases.
You should also know who their main competitors are and what the differences are between them and this employer.