course note yale university, Cheat Sheet of Economics

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Introduction

to Corporate

Finance

interview

questions

Investment Banking Interview Questions

What is net debt, and why is it used when a company is valued?

According to the CAPM, does the marketplace compensate for systematic or specific

risk?

A clock is showing 3:15, what is the angle between the minute and the hour needle?

What are deferred taxes, how do you create them, give me a specific example?

What do you think is going to happen with interest rates over the next 6 months?

Where do you see the economy going in 2009?

What is the biggest debt market (by product) in the US? Rank the top 5 markets.

What is the most liquid debt market in the world?

What does liquidity allow an investor?

What is unique about the US Treasury Market vis a vis the rest of the debt market?

What are the components of WACC?

When a company increases its leverage, how does the WACC change? Explain the

reasoning.

You are looking at a utility company, which of the three financial statements do you

look

at first?

You are looking at a retail company, which of the three financial statements do you

look

at first?

You are looking at an airline, which of the three financial statements do you look at

first?

What industry do you follow? What happened recently?

You just finished a company valuation, but you realize that you need to increase

depreciation. How does the valuation change?

Two companies with identical size, margin, products, and customers have different

P/E

ratios, why?

How would the leverage of a company differ depending on its industry and lifecycle?

If a company bought this table today, how would the three accounting statements

look

today and in one year.

Walk me down through the lines on an income statement.

Technical

(Know at least one M&A and one IPO case in detail).

How would basis risk impact your evaluation of a potential credit issuance?

What strategy would you recommend for a firm that has excess cash?

Why would a firm want to do a stock repurchase?

Which firm has the higher P/E - an all-equity firm or an all-debt firm?

Do you subtract/add deferred tax assets from Net Income to arrive at free cash flow

and

why?

Does a company’s beta change with changes in the company’s capital structure?

When would it make sense for an acquirer to acquire an overvalued target?

Why do you subtract cash from Equity Value to arrive at enterprise value if debt

equals

zero?

Fee degradation question. Assume I hired you and you need to deal with a client of

ours

who demands that we reduce our fee or she/he switches to another Investment bank if

his/her demands are not met. On the other hand, fee income is the primary source of

revenue. How do you convince the client to pay the higher fee and keep the

relationship?

Which recent deals have you followed? Do you agree with the actions taken by the

companies?

What were the multiples for the deals?

What is disintermediation?

How does compounding work? Would I better off with 10% annually or semi? What

about 8% semi-annually vs. 10% annually?

Behavioral:

Why would you prefer a pure play bank over a Citigroup or JP Morgan platform (the

question can be vice versa depending on which bank interviews you)?

What are your major weaknesses?

Give me three reasons we should NOT hire you.

Tell me about a conflict that you had with your manager in the past. How did you go

about resolving it?

Where in your work experience have you demonstrated quantitative abilities?

Give me examples of client interactions.

What makes you different than the other candidates?

What makes our bank different than XXX?

How do you deal with a non cooperative client?

Have you made mistakes in your previous work experience? How did you deal with

the

situation?

Explain in detail project X in your resume?

Give me an example when you managed to influence your 1) manager 2) your peers.

How did you do that?

Do you like to sell? Give me an example when you sold an idea to your management.

Tell me about a situation when you faced a conflict of interest. How did you handle it?

Tell me about a situation when you encountered an unethical business situation and

how

did you resolve it?

There are many strong applicants from SOM aspiring for a position with our firm. What

are the three qualities that distinguish you from many other qualified applicants?

Why do you want to pursue a career in I-banking rather than in Private Equity or

Consulting?

Describe a successful associate and how he/she contributes to the team success.

If money was no issue (i.e., you had it all), what would you do with your life?

Tell me something about yourself that I could not find in your resume.

Do you think that you can sustain the lifestyle of an investment banker?

What do you see yourself doing in five years?

What do you look for in a job?

What do you do to relieve stress?

Give me a specific example of teamwork.

Why should you be hired?

What should I be concerned about in hiring you for the summer?

Do you think you are a good salesperson? OK, sell your candidacy.

If you've always wanted to be an Investment Banker then why did you study ____ in

college?

What do you like to do in your spare time?

What’s the best book you’ve read recently?

What’s the best movie you’ve seen recently?

Are you interviewing with other investment banks?

What will you do if you don’t get an offer?

Do you see yourself as someone who likes to start a lot of different tasks or someone

who likes to carry one task out to completion?

Are you looking at anything besides banking? Have you interviewed with anyone

from

those industries?

How would you choose between several offers?

Why NOT (company you’re interviewing with)?

You don’t seem to have much experience in valuations; how do you plan to address

this

weakness?

What do you not like about the School of Management?