Investment banking interviews have two sides: fit questions ("Why banking? Why us?") and technical questions on accounting, valuation, and deals. The technical questions are fairly standard, and most of the work is knowing the answers cold and being able to walk through a small example aloud. Fit questions decide who gets the offer when several candidates know the technicals.
Below are 26 questions with answers and two worked examples. Details such as tax rates are illustrative, and numbers in your interview may differ.
Fit questions
1. Walk me through your resume.
"I study finance at a state university, and I've done two internships: one in corporate finance and one in a boutique advisory firm, where I built comparable company analyses for three sell-side projects. I've also run our investment club's research team. Those experiences made me want to work in M&A advisory."
Make it a clear story of 90 seconds, with each step leading to banking.
2. Why investment banking?
"I want to work on a range of companies and transactions, learn a lot quickly, and be held to a high standard. At my advisory internship I worked on a sale process and saw how the analysis shaped the buyers' conversations. I want to do more of that."
Give a specific experience and avoid "for the money" or "prestige."
3. Why our bank?
"Your team advised on two deals in the healthcare sector that I followed, and I've spoken to two analysts here who described a strong training culture. I'd also like to work in a group where analysts get exposure to clients early."
Use details from the firm's deals and your conversations.
4. Tell me about a time you worked under pressure or with a tight deadline.
"In my internship, a client's pitch moved up by a day. I split the work with another intern, built the model while he prepared the slides, and checked each other's work. We delivered on time with no errors, which a senior associate noted."
5. What's a recent deal or market trend you've followed?
"The consolidation among regional banks. I'd explain why buyers are paying the multiples they are, what the regulators are likely to focus on, and what I'd expect to happen next."
Choose something you can discuss in depth, with numbers.
Accounting
6. Walk me through the three financial statements.
"The income statement shows revenue, expenses, and net income over a period. The balance sheet shows assets, liabilities, and equity at a point in time. The cash flow statement starts with net income, adjusts for non-cash items and changes in working capital, and ends with the change in cash. Net income links to retained earnings on the balance sheet, and the ending cash from the cash flow statement is the cash on the balance sheet."
7. If depreciation increases by $10, what happens to the three statements? Assume a 40 percent tax rate.
"On the income statement, operating income falls by $10, taxes fall by $4, and net income falls by $6. On the cash flow statement, net income is down $6, and we add back $10 of depreciation, so cash is up $4. On the balance sheet, PP&E is down $10 and cash is up $4, so assets fall by $6. Retained earnings fall by $6, so the balance sheet balances."
8. What's the difference between cash and accrual accounting?
"Accrual accounting records revenue when it's earned and expenses when they're incurred, whatever the timing of cash. Cash accounting records them when cash moves. Public companies use accrual accounting."
9. How does goodwill arise?
"When a buyer pays more than the fair value of the target's identifiable net assets, the excess is recorded as goodwill. It's tested for impairment rather than amortized, under US GAAP for public companies."
10. What is working capital, and why does a change matter in a DCF?
"Working capital is current assets minus current liabilities, typically excluding cash and debt. An increase in working capital uses cash, because more is tied up in receivables and inventory. So an increase reduces free cash flow."
Valuation
11. What's the difference between enterprise value and equity value?
"Equity value is what the shareholders own: share price times diluted shares. Enterprise value is the value of the whole business to all capital providers: equity value plus debt, preferred stock, and noncontrolling interests, minus cash."
Worked example: a company has a $20 share price and 50 million diluted shares, so equity value is $1,000 million. It has $300 million debt and $100 million cash. Enterprise value is 1,000 + 300 - 100 = $1,200 million.
12. What are the main valuation methods?
"A discounted cash flow, which values the company on its projected cash flows. Comparable companies, which apply the trading multiples of similar public companies. And precedent transactions, which apply multiples paid in past acquisitions, usually including a control premium. For LBO analysis, what a financial buyer could pay to earn its target return."
13. Walk me through a DCF.
"Project unlevered free cash flow for five to ten years. Calculate a terminal value, either with a perpetuity growth rate or an exit multiple. Discount all cash flows and the terminal value at the weighted average cost of capital to get enterprise value. Subtract net debt to get equity value, and divide by diluted shares for a per-share value."
14. What is WACC, and how do you calculate it?
"The blended cost of the company's capital, weighted by the proportion of equity and debt. WACC = E/(D+E) x cost of equity + D/(D+E) x cost of debt x (1 - tax rate). Cost of equity is often estimated with CAPM: risk-free rate plus beta times the equity risk premium."
15. What happens to a DCF value if WACC goes up?
"It falls, because the cash flows are discounted at a higher rate. The terminal value is most sensitive, since it's far in the future."
16. Which multiples would you use for different industries?
| Industry | Common multiples |
|---|---|
| Industrials, consumer | EV/EBITDA, P/E |
| Software | EV/Revenue, EV/ARR |
| Banks | P/E, price to tangible book value |
| Real estate | Price to FFO or NAV |
| Oil and gas | EV/EBITDAX, price to NAV |
17. Why would two similar companies trade at different multiples?
"Growth, margins, risk, size, capital intensity, and market position. A faster-growing, higher-margin company usually trades at a higher multiple."
M&A and LBO
18. Walk me through an accretion/dilution analysis.
"Estimate the acquirer's pro forma net income: acquirer's earnings plus target's earnings, plus synergies, minus the after-tax cost of financing, such as lost interest on cash, new interest on debt, and extra amortization of intangibles. Divide by the pro forma share count, including any new shares issued. Compare pro forma EPS with the acquirer's standalone EPS. Higher means accretive, lower means dilutive."
19. Why would a company with a higher P/E acquiring a lower P/E company with stock be accretive?
"Because it issues shares at a high valuation to buy earnings at a low valuation. It issues fewer shares per dollar of earnings acquired, so EPS rises."
20. Walk me through a basic LBO.
"A financial sponsor buys a company using a mix of debt and equity. We model the purchase price, financing, and the company's cash flows. Cash flow pays down debt over the holding period, often five years. At exit, we sell at an assumed multiple, repay the remaining debt, and the remainder goes to the equity holders. The sponsor's return, such as IRR or multiple of money, depends on the entry price, leverage, growth, margins, and exit."
21. What makes a good LBO candidate?
"Stable, predictable cash flows, strong market position, low capital needs, opportunities to improve operations, a reasonable entry price, and assets that could back debt."
22. What are synergies?
"Benefits from combining two companies. Cost synergies, such as removing duplicate functions, are more reliable. Revenue synergies, such as cross-selling, are less certain, and buyers often discount them."
Markets
23. Where is the 10-year Treasury yield, and what does it mean for valuations?
"Check the current level before your interview. A higher risk-free rate raises the discount rate, which lowers valuations, particularly for long-duration growth companies. It also raises the cost of financing for LBOs."
24. What would you do with a company that had falling margins?
"Find the cause first, such as input costs, pricing, mix, or one-off items. Compare with competitors, then decide whether to adjust the projections, and show the sensitivity in the valuation."
25. Pitch me a stock.
"I'd pick a company I know. State the thesis in a sentence, the key reasons, the valuation versus peers, the main risks, and the catalysts, in about two minutes."
26. Do you have any questions for us?
"What does a typical week look like for an analyst on this team? How are analysts staffed on deals? What do the best analysts do differently in their first year?"
How to prepare
Learn the technical answers from a standard guide such as a banking prep course, then practice saying them out loud, with a pen and paper for the examples. Prepare your resume story, your "why banking" answer, and two deals you can discuss. Reread our guides to accounting interview questions, behavioral answers, and questions to ask a recruiter.
A mock interview transcript shows where you hesitated on a technical answer. Follow the employer's rules on AI tools in any live interview.
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