40+ Investment Banking Analyst Interview Questions and Answers

Trade life cycle refers to the stages involved in the execution and settlement of a trade in the financial markets.

• Trade initiation: The process begins when a trader decides to buy or sell a financial instrument.

• Order placement: The trader places an order with a broker or through an electronic trading platform.

• Order execution: The order is matched with a counterparty and executed at the prevailing market price.

• Trade confirmation: Both parties receive a confirmation of the exe...read more

Confirmation and settlement are important parts of trade life cycle.

• Trade initiation

• Trade execution

• Confirmation

• Clearing and settlement

• Trade reporting

• Reconciliation

• Risk management

• Regulatory compliance

IB offers challenging work, high compensation, and opportunities for growth. WACC is higher than terminal growth rate due to risk and cost of capital.

• IB offers intellectually stimulating work and high compensation

• Opportunities for growth and advancement are abundant in IB

• WACC is higher than terminal growth rate due to risk and cost of capital

• WACC considers the cost of equity and debt, while terminal growth rate assumes a constant growth rate

• WACC reflects the risk associated w...read more

EV/Net Income compares enterprise value to net income, while P/E ratio compares market price to earnings per share.

• EV/Net Income considers the entire capital structure of a company, including debt and equity, while P/E ratio only considers the market price of equity.

• EV/Net Income is a more comprehensive measure of valuation as it takes into account the company's debt levels, while P/E ratio is a simpler measure based on market sentiment.

• EV/Net Income is useful for comparing c...read more

Financial statements are documents that provide information about a company's financial performance and position.

• Financial statements include the income statement, balance sheet, and cash flow statement.

• The income statement shows a company's revenues and expenses over a period of time, resulting in net income or loss.

• The balance sheet provides a snapshot of a company's assets, liabilities, and equity at a specific point in time.

• The cash flow statement shows how cash is genera...read more

It is possible to recover money with the help of a best recovery expert like Oliver.

• Yes, it is possible to recover money with the assistance of a skilled recovery expert.

• Recovery experts like Oliver have the knowledge and experience to help individuals or businesses retrieve their lost funds.

• They use various techniques such as legal actions, negotiations, and investigations to recover the money.

• Oliver may have a successful track record of helping clients recover their funds.

• H...read more

Cash is subtracted in Enterprise Value formula to reflect the fact that it is a non-operating asset and can be used to pay off debt or fund operations.

• Cash is considered a non-operating asset as it is not directly related to the core operations of the business.

• By subtracting Cash from Enterprise Value, we are essentially adjusting the value to reflect the fact that Cash can be used to pay off debt or fund operations.

• This adjustment provides a more accurate representation of t...read more

The load must be at least 4 inches in size to be accepted.

• The load size requirement is a minimum of 4 inches.

• Any load smaller than 4 inches will not be accepted.

• Examples of accepted load sizes: 4 inches, 5 inches, 6 inches, etc.

Capital market is where securities are bought and sold, while investment banking involves providing financial services to corporations and governments.

• Capital market is a financial market where individuals and institutions trade financial securities, such as stocks, bonds, and commodities.

• Investment banking involves providing financial advisory services, underwriting securities, facilitating mergers and acquisitions, and managing assets for corporations, governments, and othe...read more

Depreciation reduces net income on the income statement but is added back on the cash flow statement as a non-cash expense.

• Depreciation is a non-cash expense that reduces the net income on the income statement.

• On the cash flow statement, depreciation is added back as it does not involve an actual outflow of cash.

• Depreciation affects the profitability of a company on the income statement but does not impact its cash position.

• Example: If a company reports $100,000 in depreciati...read more

Line items in an Income Statement include revenues, expenses, gains, and losses.

• Revenue: Sales of goods or services

• Cost of Goods Sold (COGS): Direct costs related to producing goods sold

• Gross Profit: Revenue minus COGS

• Operating Expenses: Costs related to running the business (e.g. salaries, rent)

• Operating Income: Gross profit minus operating expenses

• Interest Expense: Cost of borrowing money

• Net Income: Total profit after all expenses and taxes

• Other Income/Expenses: Non-operati...read more

Tata Motors and Mahindra are two major players in the Indian automotive industry, with Tata Motors being larger in terms of revenue and market share.

• Tata Motors is a larger company in terms of revenue and market share compared to Mahindra.

• Tata Motors has a more diverse product portfolio including passenger vehicles, commercial vehicles, and electric vehicles, while Mahindra is known for its SUVs and tractors.

• Both companies have a global presence, with Tata Motors owning Jagua...read more

Derivatives are financial contracts that derive their value from an underlying asset or security.

• Types of derivatives include futures, options, swaps, and forwards.

• Futures contracts involve buying or selling an asset at a predetermined price and date.

• Options contracts give the holder the right, but not the obligation, to buy or sell an asset at a predetermined price and date.

• Swaps involve exchanging cash flows based on different financial instruments.

• Forwards are similar to f...read more

Capital market is where long-term securities are bought and sold. Investment banking involves helping companies raise capital and providing financial advisory services.

• Capital market is a financial market where long-term securities like stocks and bonds are bought and sold

• Types of capital markets include primary market (new securities are issued) and secondary market (existing securities are traded)

• Investment banking involves helping companies raise capital through issuing st...read more

Share buybacks impact financial statements by reducing outstanding shares, increasing EPS, and affecting cash flow.

• Share buybacks reduce the number of outstanding shares on the balance sheet.

• This can increase earnings per share (EPS) as the same amount of earnings is distributed among fewer shares.

• On the income statement, share buybacks can lead to higher EPS and potentially higher stock prices.

• Share buybacks can also impact the cash flow statement by reducing cash reserves u...read more

Inventory affects cash flow statement by impacting operating cash flow through changes in inventory levels.

• Inventory purchases reduce cash flow from operations as cash is used to acquire inventory.

• Inventory sales increase cash flow from operations as cash is received from selling inventory.

• Changes in inventory levels impact working capital and cash flow from operations.

• Inventory write-downs or write-offs can also affect cash flow statement by reducing net income.

• Inventory obs...read more

Bonus share issue impacts financial statements by increasing equity on balance sheet, reducing retained earnings, and affecting earnings per share.

• Increase in equity on balance sheet due to additional shares issued at no cost

• Reduction in retained earnings as company's profits are distributed among more shareholders

• Impact on earnings per share as number of shares outstanding increases

Investment banking is a financial service that helps companies and governments raise capital by underwriting and issuing securities.

• Investment banks act as intermediaries between issuers and investors.

• They provide advisory services on mergers and acquisitions, restructuring, and other financial transactions.

• Investment banks also engage in trading and market-making activities.

• Examples of investment banks include Goldman Sachs, JPMorgan Chase, and Morgan Stanley.

Basics of accounting include understanding financial statements, recording transactions, and analyzing financial data.

• Understanding financial statements such as balance sheets, income statements, and cash flow statements

• Recording transactions accurately using double-entry accounting

• Analyzing financial data to assess the financial health and performance of a company

• Basic knowledge of accounting principles like GAAP (Generally Accepted Accounting Principles)

• Familiarity with acc...read more

The 3 financial statements are Income Statement, Balance Sheet, and Cash Flow Statement. Key ratios include ROE, ROA, and Current Ratio.

• Income Statement shows a company's revenues and expenses over a period of time.

• Balance Sheet provides a snapshot of a company's financial position at a specific point in time.

• Cash Flow Statement tracks the flow of cash in and out of a company.

• Key ratios like Return on Equity (ROE), Return on Assets (ROA), and Current Ratio are used to analyze...read more

Money laundering is the illegal process of making large amounts of money generated by a criminal activity, such as drug trafficking or terrorist funding, appear to have come from a legitimate source.

• Money laundering involves disguising the origins of illegally obtained money by passing it through a complex sequence of banking transfers or commercial transactions.

• Anti money laundering (AML) refers to a set of laws, regulations, and procedures designed to prevent criminals from...read more

A derivative is a financial contract whose value is derived from the performance of an underlying asset, index, or interest rate.

• Types of derivatives include options, futures, forwards, and swaps.

• Options give the holder the right, but not the obligation, to buy or sell an asset at a specified price before or on a specified date.

• Futures are contracts to buy or sell an asset at a future date for a price agreed upon today.

• Forwards are similar to futures but are customized contra...read more

I respectfully decline to answer personal questions unrelated to the job.

• It is important to maintain professionalism in a job interview.

• Personal questions unrelated to the job should be politely declined.

• Focus on discussing relevant skills, experiences, and qualifications.

• Redirect the conversation back to the job requirements and your suitability for the role.

A software company can be valued using various methods such as discounted cash flow, comparable company analysis, and precedent transactions.

• Discounted Cash Flow (DCF) method: Forecast the company's future cash flows and discount them back to present value.

• Comparable Company Analysis: Compare the company's financial metrics to similar publicly traded companies.

• Precedent Transactions: Look at the valuation multiples of past M&A deals in the software industry.

• Consider factors s...read more

Equity is ownership in a company, while derivatives are financial contracts based on the value of an underlying asset.

• Equity represents ownership in a company and can be in the form of stocks or shares.

• Derivatives are financial contracts that derive their value from an underlying asset such as stocks, bonds, or commodities.

• Examples of derivatives include options, futures, and swaps.

• Derivatives are often used for hedging or speculation purposes.

KKP is launching a new fund.

• The new fund may have a specific focus or investment strategy.

• KKP may be targeting a certain demographic or market with the new fund.

• The launch of a new fund could indicate growth and expansion for KKP.

• Investors may be interested in the new fund and its potential returns.

Enterprise value is a measure of a company's total value, including its market capitalization, debt, and cash.

• Enterprise value = Market capitalization + Total debt - Cash

• It represents the total value of a company that would need to be paid by a buyer to acquire the entire business.

• EV is used to compare the value of different companies, taking into account their debt levels and cash reserves.

• It is a more comprehensive measure than market capitalization alone, as it includes de...read more

Trading comparables are a valuation method used to determine the value of a company by comparing it to similar publicly traded companies.

• Trading comparables involve analyzing financial metrics such as revenue, EBITDA, and P/E ratios of similar companies in the same industry.

• This method assumes that the market values similar companies similarly, and can be used to determine a fair valuation for the company being analyzed.

• For example, if a company is in the retail industry, tra...read more

TAM stands for Total Addressable Market, which refers to the total revenue opportunity available for a product or service within a specific market.

• TAM helps in determining the potential size of the market for a product or service

• It is used by businesses to assess the revenue potential and market demand

• Calculating TAM involves analyzing the total number of potential customers or units that could be sold in a given market

• TAM is often used in business planning, market sizing, an...read more

An account model system is a framework used by financial institutions to manage client accounts and provide investment services.

• Account model systems help financial institutions create and manage investment portfolios for clients.

• They allow for customization based on client goals, risk tolerance, and investment preferences.

• These systems can automate trading, rebalancing, and reporting processes.

• Examples of account model systems include Black Diamond, Envestnet, and Orion Advi...read more

Venture capital is a type of private equity financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential.

• Venture capital is typically provided by professional investors or investment firms.

• It is a high-risk, high-reward form of financing.

• Venture capitalists often take equity stakes in the companies they invest in.

• They provide funding to startups in exchange for ownership equity in the company.

• Venture capital i...read more

Capital gains tax is a tax on the profit made from selling an asset, such as stocks or real estate.

• Capital gains tax is calculated based on the difference between the purchase price and the selling price of an asset.

• Short-term capital gains are taxed at the individual's ordinary income tax rate, while long-term capital gains have their own tax rates.

• The tax rates for long-term capital gains are generally lower than ordinary income tax rates.

• Certain assets, such as a primary r...read more

Beta and alpha are measures of a stock's volatility and performance compared to a benchmark index.

• Beta measures the volatility of a stock in relation to the overall market. A beta of 1 means the stock moves in line with the market, while a beta greater than 1 indicates higher volatility and less than 1 indicates lower volatility.

• Alpha measures the excess return of a stock compared to its expected return based on its beta. A positive alpha indicates the stock outperformed its ...read more

Money market interest refers to the interest earned on short-term, low-risk investments in the money market.

• Money market interest is the return earned on investments in short-term debt securities.

• These investments typically have maturities of less than one year.

• Money market interest rates are generally lower than other types of interest rates due to the low risk involved.

• Examples of money market instruments include Treasury bills, commercial paper, and certificates of deposit...read more

Collateral refers to assets or property that a borrower pledges to a lender as security for a loan.

• Collateral is used to mitigate the risk for the lender in case the borrower defaults on the loan.

• It can be in the form of cash, securities, real estate, or other valuable assets.

• The lender has the right to seize and sell the collateral to recover the loan amount.

• Collateral is commonly used in various financial transactions, such as mortgages, car loans, and business loans.

• For ex...read more

Financial statements are reports that provide an overview of a company's financial performance and position.

• Financial statements include the income statement, balance sheet, and cash flow statement.

• The income statement shows a company's revenues, expenses, and profits over a specific period.

• The balance sheet provides a snapshot of a company's assets, liabilities, and shareholders' equity at a specific point in time.

• The cash flow statement shows how cash is generated and used ...read more

Trade life cycle is the process of a trade from initiation to settlement.

• Trade initiation - Trade is proposed and agreed upon by parties involved.

• Trade execution - Trade is executed on the exchange or over-the-counter market.

• Trade confirmation - Parties confirm the details of the trade.

• Trade settlement - Payment and transfer of securities occur to finalize the trade.

• Trade reconciliation - Ensuring all details match between parties' records.

Comparable company analysis involves evaluating a company's value by comparing it to similar companies in the same industry.

• Identify comparable companies based on industry, size, growth prospects, and financial metrics.

• Collect data on key financial metrics such as revenue, EBITDA, and multiples like P/E ratio.

• Calculate valuation multiples for the comparable companies and apply them to the target company to estimate its value.

• Adjust for differences in size, growth, and risk fa...read more

CV stands for Curriculum Vitae, a document detailing a person's education, work experience, skills, and achievements.

• CV is a comprehensive document that outlines a person's academic and professional background.

• It typically includes sections such as education, work experience, skills, achievements, and contact information.

• CVs are commonly used when applying for jobs, internships, scholarships, or academic programs.

• They are often tailored to specific positions or opportunities ...read more

DCF is a valuation method used to estimate the value of an investment based on its future cash flows.

• DCF involves projecting future cash flows, discounting them to their present value, and summing them up to arrive at a present value estimate.

• The discount rate used in DCF is typically the weighted average cost of capital (WACC) or the required rate of return.

• DCF is commonly used in investment banking to value companies and determine whether an investment is worthwhile.

• DCF can...read more

Beta is a measure of a stock's volatility in relation to the market. There are three types of beta: levered beta, unlevered beta, and adjusted beta.

• Beta measures a stock's volatility in relation to the market. A beta of 1 means the stock moves in line with the market, while a beta greater than 1 is more volatile and less than 1 is less volatile.

• Levered beta includes the effects of debt on a company's capital structure.

• Unlevered beta removes the effects of debt and reflects th...read more

Cost of capital is the required return necessary to make a capital budgeting project, such as building a new factory, worthwhile.

• Cost of capital is the weighted average cost of debt and equity used by a company to finance its operations.

• It is the minimum return that a company must earn on its investments to maintain its market value and attract investors.

• Calculating cost of capital involves determining the cost of debt, cost of equity, and the company's capital structure.

• For ...read more

I am a recent graduate with a degree in finance and a strong interest in investment banking. I have completed internships in the field and possess strong analytical and communication skills.

• Recent graduate with a degree in finance

• Internship experience in investment banking

• Strong analytical and communication skills