Investment banking interview questions, with what a strong answer covers
Investment banking interviews test two things: whether you can do the technical work, and whether you'd be a good analyst to have on a deal team at 2am. Most first rounds and Superdays mix 'fit' questions (why banking, walk me through your resume) with technicals on accounting, valuation and M&A.
Below are the questions that come up most, grouped by topic. For each one you'll see what a strong answer covers. Don't memorize scripts. Learn the logic, then practice saying it out loud until it's clean and under two minutes.
Fit and behavioral
Basic
Walk me through your resume.
A strong answer covers
- Clear arc: start, spark for finance, actions taken, why this role now
- Highlights 2–3 experiences rather than every line
- About 90 seconds to 2 minutes
- Ends on why this specific role
Basic
Why investment banking?
A strong answer covers
- Specific reasons: learning curve, deal exposure, skills, people
- Backed by real experiences such as conversations or a stock pitch
- Avoids money and prestige as the main reasons
- Shows understanding of what the job actually is
Basic
Why our firm?
A strong answer covers
- Names specific people they spoke with
- References specific deals or groups at the firm
- Connects the firm's strengths to their own goals
- Avoids generic praise like 'great culture'
Intermediate
What's your greatest weakness?
A strong answer covers
- A real, relevant weakness
- Not a disguised strength
- Concrete steps they're taking to improve
- Evidence of progress
Advanced
At 2am you find a mistake in a model that goes to the client at 8am. What do you do?
A strong answer covers
- Tells their associate or VP right away
- Fixes it and checks what else it affects
- Doesn't hide or quietly patch it
- Shows judgment, ownership and calm under pressure
Accounting
Basic
Walk me through the three financial statements.
A strong answer covers
- Income statement: revenue to net income over a period
- Balance sheet: assets = liabilities + equity at a point in time
- Cash flow statement: operating, investing, financing
- Brief mention of how they connect
Basic
How do the three financial statements link together?
A strong answer covers
- Net income flows to the top of the cash flow statement
- Net income (less dividends) flows into retained earnings
- Ending cash on the CFS becomes cash on the balance sheet
- Non-cash items and working capital changes connect IS and BS through the CFS
Intermediate
Depreciation goes up by $10. Walk me through the three statements (40% tax rate).
A strong answer covers
- IS: pre-tax income −10, net income −6
- CFS: net income −6, add back +10, cash +4
- BS: cash +4, PP&E −10, assets −6
- Retained earnings −6, so the balance sheet balances
Enterprise value
Basic
What's the difference between enterprise value and equity value?
A strong answer covers
- Equity value belongs to shareholders: share price × diluted shares
- Enterprise value is the core business's value to all capital providers
- EV = equity value + debt + preferred + noncontrolling interest − cash
- EV pairs with EBITDA and revenue; equity value pairs with net income
Intermediate
Why do we subtract cash when calculating enterprise value?
A strong answer covers
- Cash isn't part of the core operating business
- A buyer effectively gets the cash back
- EV is meant to value operations only
- Some argue only excess cash should be subtracted
Valuation
Basic
What are the main ways to value a company?
A strong answer covers
- Trading comparables
- Precedent transactions
- Discounted cash flow
- Shown together on a football field; may mention LBO analysis
Basic
Walk me through a DCF.
A strong answer covers
- Project unlevered free cash flow for 5–10 years
- Terminal value by perpetuity growth or exit multiple
- Discount at WACC
- Sum to EV, then bridge to equity value and per-share value
Intermediate
How do you calculate WACC?
A strong answer covers
- Weighted average of cost of equity and after-tax cost of debt
- Cost of equity via CAPM: risk-free rate + beta × equity risk premium
- After-tax cost of debt = rate × (1 − tax rate)
- Weights based on market values
Intermediate
Which valuation method usually gives the highest value, and why?
A strong answer covers
- Precedent transactions, usually
- Include a control premium paid by acquirers
- Can also reflect synergies
- Depends on market conditions; a DCF can be higher with aggressive assumptions
M&A
Basic
Why would a company acquire another company?
A strong answer covers
- Growth: new markets, products or customers
- Synergies: cost savings or revenue gains
- Acquire technology or talent
- Defensive reasons or using excess cash
Intermediate
Walk me through a merger model.
A strong answer covers
- Project both companies' financials
- Determine price and mix of cash, stock and debt
- Combine income statements with synergies, interest and new shares
- Calculate pro forma EPS and accretion or dilution
Advanced
Buyer P/E 15x, target P/E 25x, all-stock deal. Accretive or dilutive, and what could change that?
A strong answer covers
- Dilutive: the buyer pays 25x earnings with stock that trades at only 15x
- Buyer's earnings yield (6.7%) is above target's (4%)
- Synergies could offset the dilution
- Using cash or debt could make it accretive
Quick quiz (10 questions)
Which statement is a snapshot at a single point in time?
- Income statement
- Balance sheet ✓
- Cash flow statement
- Statement of retained earnings
The balance sheet shows what a company owns and owes on one date. The other two cover a period.
Net income from the income statement flows into which two places?
- Revenue on the income statement and cash on the balance sheet
- Top of the cash flow statement and retained earnings ✓
- Accounts payable and the investing section of the cash flow statement
- Interest expense and the debt schedule on the balance sheet
Net income is the first line of cash from operations and flows into retained earnings in equity.
Depreciation rises $10 with a 40% tax rate. Net income changes by:
- −$10
- −$6 ✓
- −$4
- +$4
$10 lower pre-tax income, $4 less tax, so net income falls $6.
Depreciation rises $10 with a 40% tax rate. Ending cash changes by:
- +$4 ✓
- −$6
- +$10
- No change
Start with −$6 net income, add back the $10 non-cash expense: +$4.
Equity value $500, debt $200, cash $50. Enterprise value is:
- $750
- $650 ✓
- $550
- $450
500 + 200 − 50 = 650.
Which multiple pairs with equity value?
- EV/EBITDA
- EV/Revenue
- P/E ✓
- EV/EBIT
Net income belongs to equity holders only, so P/E uses equity value.
Among the standard valuation methods, which usually produces the highest valuation?
- Trading comps
- Precedent transactions ✓
- 52-week high/low
- Liquidation value
Acquirers pay a control premium, which pushes precedent multiples up.
Unlevered free cash flow is discounted at:
- Cost of equity
- Cost of debt
- WACC ✓
- Risk-free rate
UFCF goes to all capital providers, so it's discounted at the blended WACC.
Buyer P/E 20x, target P/E 15x, all-stock deal. The deal is:
- Accretive ✓
- Dilutive
- Neutral
- Impossible to tell
The buyer uses expensive currency (high P/E) to buy cheaper earnings.
The 'cost' of issuing stock in a merger model is measured by:
- The buyer's dividend yield on its current shares
- Buyer's earnings yield (1 ÷ P/E) ✓
- The buyer's interest rate on new borrowing
- The target's share price divided by its earnings
New shares claim a slice of earnings equal to the inverse of P/E.
Reading isn't practice. Answer these out loud, get scored, and track your progress for free.
Practice these as a mock interview →More free guides
- Accounting interview questions: the three statements
- Enterprise value vs. equity value
- How to walk through a DCF
- LBO interview questions and a worked paper LBO
- Merger models and accretion/dilution
- Private equity interview questions
- IRR and MOIC cheat sheet for interviews
- Hedge fund interview questions and how to pitch a stock