IClub
B Careers
Corporate finance, investment banking, research, sales and trading
Interview guide:
A preparation for successful corporate finance journey
© Investment Banking Club MSU (IB Club MSU)
1-44 Leninskie Gory
Lomonosov Moscow State University
Faculty of Economics
www.ib-club.ru
IClub
B Careers
Corporate finance, investment banking, research, sales and trading
Hiring process
Technical questions
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
Interview (1/7)
What parameters are generally used for project valuation purposes?
What does NPV mean (please, describe the concept in details)?
What does IRR mean?
What does MIRR mean?
Please, walk me through three main business valuation methods
Please, walk me through DCF approach (a detailed review and explanations)
Please define capitalization rate
What types of discount rate are generally used in financial models?
Terminal value estimation (detailed discussion of 2 main approaches)
What does WACC mean?
WACC calculation (detailed discussion)
Why cost of debt is less than cost of equity? Can you think of an example
when it is not the case?
How do you calculate the cost of equity?
Please, walk me through the CAPM model
What does risk free rate mean?
Beta coefficient. Please discuss the parameter in detail
What does beta indicate in CAPM model?
Beta coefficient formula, discuss levered and unlevered beta
Key risks addressed by CAPM model
What risks within CAPM can be measured by beta and why?
What does risk premium mean?
Market risk premium in China and USA: which one is higher?
Please, walk me through dividend discount model
EV calculation (detailed formula starting from Equity value)
The concept of EV (the meaning, not a formula)
Disclaimer: IB Club Careers acts with non-commercial initiative and helps IB Club members in career development. IB Club does not guarantee the
success of the application and does not give any insider contacts to IB Club members
CONFIDENTIAL AND PROPRIETARY: Any use of this material without specific permission of MSU IB Club is strictly prohibited
Investment Banking Club MSU (IB Club MSU)
1-44 Leninskie Gory
Faculty of Economics, Lomonosov Moscow State University
www.ib-club.ru
IClub
B Careers
Corporate finance, investment banking, research, sales and trading
Hiring process
Technical questions
Interview (2/7)
26. FCFF calculation (starting from EBITDA)
27. How is Net Operating Loss modeled in DCF?
28. If the company is expected to maintain a significant permanent excess cash
balance (but still have net debt >0), how will it affect WACC?
29. When does residual income valuation approach work better (or more
suitable) than DCF?
30. Is EPS enhancement a good indicator of value accretion at M&A? Why or
why not? What are the possible alternatives?
31. Is there a fundamental link between DCF and EV/EBITDA?
32. Consolidation accounting (a detailed overview of a process)
33. Why does FCFF calculation start with EBIT*(1-t) and does not account for
interest expense tax shield?
34. Additional $100k of Depreciation should be accrued. How will it affect three
main accounting statements (BS, PL, CF)?
35. Why is P/S a bad multiple?
36. Why P/BV multiple can be negative? (quantitative explanation is required)
37. What are advantages/disadvantages of P/E, EV/EBITDA, EV/Sales multiples
etc?
38. Where is P/BV commonly used? And why?
39. Please discuss industry specific multiples (oil&gas, retail, telecom, utilities,
etc.)
40. What is EV/EBITDAR and where is it used? Why? Which adjustments are
needed to EV and to EBITDA to calculate it?
41. How to calculate NWC?
42. What is a goodwill and a minority interest? How to calculate each of them?
43. Financial/operational lease accounting implications, when leverage is higher?
Disclaimer: IB Club Careers acts with non-commercial initiative and helps IB Club members in career development. IB Club does not guarantee the
success of the application and does not give any insider contacts to IB Club members
CONFIDENTIAL AND PROPRIETARY: Any use of this material without specific permission of MSU IB Club is strictly prohibited
Investment Banking Club MSU (IB Club MSU)
1-44 Leninskie Gory
Faculty of Economics, Lomonosov Moscow State University
www.ib-club.ru
IClub
B Careers
Corporate finance, investment banking, research, sales and trading
Hiring process
Technical questions
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
Interview (3/7)
What would be the impact on EV if the company conducts an IPO?
How to calculate cost of equity without using CAPM model?
What is Loss Carried forward? How it should be accounted for?
What is Deferred tax asset/liability? In which cases they need to be
accounted for in valuation of the company?
If EV/Sales for two firms is 1x but EV/EBITDA is 1x for one company and 2x for
another, what can be the reason for that?
What do EBITDA, FCFF, FCFE mean?
Accounting of financial assets/liabilities (a detailed explanation)
Adjustments for associates. In which cases associates are accounted for in
DCF?
Owner of small business asked you to value his business – please explain
the logic of your approach to valuation
Company showed positive net profit in 2000 and 2001 but had problems
with cash in 2001. Why did it happen? (reasons of cash decrease)
Please, provide the examples of companies with Beta < 1 (<0) in Russia and
explain the nature of such values?
Walk me through the process of a typical sell-side/buy-side M&A deal
Walk me through the process of IPO
What does typical pitch book look like?
Imagine that you want to draft a 1-slide company profile for an investor.
What would you present to them?
Walk me through the 3 financial statements (BS, PL, CF)
How are 3 financial statements linked together?
If depreciation is a non-cash expense, why does it affect the cash balance?
Why is the Income Statement not affected by Inventory purchases?
Disclaimer: IB Club Careers acts with non-commercial initiative and helps IB Club members in career development. IB Club does not guarantee the
success of the application and does not give any insider contacts to IB Club members
CONFIDENTIAL AND PROPRIETARY: Any use of this material without specific permission of MSU IB Club is strictly prohibited
Investment Banking Club MSU (IB Club MSU)
1-44 Leninskie Gory
Faculty of Economics, Lomonosov Moscow State University
www.ib-club.ru
IClub
B Careers
Corporate finance, investment banking, research, sales and trading
Hiring process
Technical questions
Interview (4/7)
63. “Calendarization” of financial figures (a detailed explanation)
64. How do you calculate diluted shares and Diluted Equity Value?
65. Could a company have a negative Equity Value? If yes, what would that
mean?
66. Could a company have a negative Enterprise Value? If yes, what does that
mean?
67. Can you walk me through the Public Comparables and Precedent
Transactions valuation methods?
68. How do you select Comparable Companies or Precedent Transactions?
69. For Public Comps, you do calculate Equity Value and Enterprise Value to use it
in multiples calculation (based on companies’ share prices and number of
shares). What about Precedent Transactions method? How do you calculate
multiples within this method?
70. What additional valuation methods do you know (except 3 main methods)?
71. When Liquidation value is calculated?
72. In which cases EBIT multiples are more preferable compared to EBITDA
multiples?
73. What are the drawbacks of Public Company valuation methodology?
74. What are the drawbacks of Precedent Transactions valuation methodology?
75. Why do you add back non-cash charges when calculating the Free Cash Flow?
76. How do you determine a firm’s Optimal Capital Structure? What does it
mean?
77. Explain why mid-year convention is used in DCF
78. Which industry you are comfortable with? Detailed discussion of market
players, demand, supply, multiples, WACC, other specific aspects
79. Detailed discussion of your recent projects (multiples, wacc, deliverables)
Disclaimer: IB Club Careers acts with non-commercial initiative and helps IB Club members in career development. IB Club does not guarantee the
success of the application and does not give any insider contacts to IB Club members
CONFIDENTIAL AND PROPRIETARY: Any use of this material without specific permission of MSU IB Club is strictly prohibited
Investment Banking Club MSU (IB Club MSU)
1-44 Leninskie Gory
Faculty of Economics, Lomonosov Moscow State University
www.ib-club.ru
IClub
B Careers
Corporate finance, investment banking, research, sales and trading
Hiring process
General / fit questions
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
Interview (5/7)
Please, provide your view on some recent political reforms in Moscow and
their potential impact on future development of the city
Why should we choose you and not another candidate?
How would you spend one million dollars?
List your 3 weaknesses
What is wrong with your current employer? Why do you want to change it?
Aren’t you too old/experienced for this position?
Why did you choose our bank? Why not GS, JPM, DB, UBS or other?
What was the historical share price performance of our bank?
How long do you plan to work at our bank?
Describe your goals for next 10-15 years?
Why did you choose IBD and not Research/Sales/Trading?
What did you learn through your prior employment?
Why didn’t you go to UK/US to get education?
Taking into account your studies/24/7 work etc. how can your girlfriend still
be with you?
Do you have really good soft skills? Where did you get them?
Are you ready to work all night every day including weekends?
How do you see your role in project team?
Are you ready to do job that nobody needs at the end?
You are working with Associate A. Then another Associate B comes and says
that he would need your help. You say that you will work all day and all night
to complete their tasks. Then other Associate C comes and ask you to help as
well. What will you do?
Disclaimer: IB Club Careers acts with non-commercial initiative and helps IB Club members in career development. IB Club does not guarantee the
success of the application and does not give any insider contacts to IB Club members
CONFIDENTIAL AND PROPRIETARY: Any use of this material without specific permission of MSU IB Club is strictly prohibited
Investment Banking Club MSU (IB Club MSU)
1-44 Leninskie Gory
Faculty of Economics, Lomonosov Moscow State University
www.ib-club.ru
IClub
B Careers
Corporate finance, investment banking, research, sales and trading
Hiring process
General / fit questions
Interview (6/7)
20. You have conflict in the team. You don't agree with some arguments / to do
some stuff. How are you going to resolve this issue?
21. Tell us about one "innovative" thing that you have made in your life
22. Why did you choose M&A/ECM (not restructuring for example)?
23. What is your greatest strength?
24. What is your biggest achievement?
25. What is your biggest failure?
26. Can you tell us about a team project or some kind of group activity you’ve
worked on before?
27. Can you describe a situation where a team did not work as intended? Whose
fault was it?
28. How much do you know about the lifestyle in this industry?
29. Name the transactions (ongoing, executed) of the company you applied for
Disclaimer: IB Club Careers acts with non-commercial initiative and helps IB Club members in career development. IB Club does not guarantee the
success of the application and does not give any insider contacts to IB Club members
CONFIDENTIAL AND PROPRIETARY: Any use of this material without specific permission of MSU IB Club is strictly prohibited
Investment Banking Club MSU (IB Club MSU)
1-44 Leninskie Gory
Faculty of Economics, Lomonosov Moscow State University
www.ib-club.ru
IClub
B Careers
Corporate finance, investment banking, research, sales and trading
Hiring process
Brain teasers
1.
2.
3.
4.
5.
Interview (7/7)
You are given 12 balls and a scale. Of the 12 balls, 11 are identical and 1
weighs slightly more. How do you find the heavier ball using the scale only
three times?
You are given 12 balls and a scale. Of the 12 balls, 11 are identical and 1
weighs EITHER slightly more or less. How do you find the ball that is different
using the scale only three times AND tell if it is heavier or lighter than the
others?
A windowless room has 3 lightbulbs. You are outside the room with 3
switches, each controlling one of the lightbulbs. If you can only enter the
room one time, how can you determine which switch controls which
lightbulb?
Four investment bankers need to cross a bridge at night to get to a meeting.
They have only one flashlight and 17 minutes to get there. The bridge must
be crossed with the flashlight and can only support two bankers at a time.
The Analyst can cross in 1 minute, the Associate can cross in 2 minutes, the
VP can cross in 5 minutes and the MD takes 10 minutes to cross. How can
they all make it to the meeting in time?
Three envelopes are presented in front of you by an interviewer. One
contains a job offer, the other two contain rejection letters. You pick one of
the envelopes. The interviewer then shows you the contents of one of the
other envelopes, which is a rejection letter. The interviewer now gives you
the opportunity to switch envelope choices. Should you switch?
Disclaimer: IB Club Careers acts with non-commercial initiative and helps IB Club members in career development. IB Club does not guarantee the
success of the application and does not give any insider contacts to IB Club members
CONFIDENTIAL AND PROPRIETARY: Any use of this material without specific permission of MSU IB Club is strictly prohibited
Investment Banking Club MSU (IB Club MSU)
1-44 Leninskie Gory
Faculty of Economics, Lomonosov Moscow State University
www.ib-club.ru
IClub
B Careers
Corporate finance, investment banking, research, sales and trading
Hiring process
Academic or “Must to be read”
1.
2.
3.
4.
5.
6.
7.
8.
Books
Principles of Corporate Finance 8th Edition by Richard A.Brealey, Stewart
C.Myers, and Franklin Allen
Damodaran on Valuation: Security Analysis for Investment and Corporate
Finance by Damodaran
Investment Banking: Valuation, Leveraged Buyouts, and Mergers and
Acquisitions (Wiley Finance) by Joshua Rosenbaum, Joshua Pearl, Joseph R.
Perella
Valuing a Business: the Analysis and Appraisal of Closely Held Companies by
Shannon P. Pratt with Alina V. Niculita
CFA Level 1 & 2: Equity, Financial Analysis and Reporting
Beat the street II: I-Banking interview practice guide by WetFeet
How to Answer The 64 Toughest Interview Questions
Vault career guide to Investment Banking by Tom Lott, Derek Loosvelt and the
staff of Vault
Disclaimer: IB Club Careers acts with non-commercial initiative and helps IB Club members in career development. IB Club does not guarantee the
success of the application and does not give any insider contacts to IB Club members
CONFIDENTIAL AND PROPRIETARY: Any use of this material without specific permission of MSU IB Club is strictly prohibited
Investment Banking Club MSU (IB Club MSU)
1-44 Leninskie Gory
Faculty of Economics, Lomonosov Moscow State University
www.ib-club.ru