17 Real Life Interview Questions Asked of Investment Bankers

Investment banking interviews are known to be rather intensive, with hiring managers digging deeply into a candidate’s technical aptitudes. We collected a series of these types of questions recently asked by investment banks of graduates of New York University’s Leonard N. Stern School of Business.

How would you do?

1. If I am advising the owner of a private business on exit strategies. Walk me through the various alternatives and valuations.
2. Tell me how to capitalize operating leases and the impacts on the statements.
3. If I have 2 companies -­ one that makes bumpers with one customer (Ford) and one that provides consulting services for a wide variety of consumer goods companies. Tell me how you evaluate the credit quality of each company? Which company would you lend money to (in good times and in the trough of an economic cycle)?
4. How would you value a food cart stand like the one outside this building on the corner?
5. What happens to the financial statements when you invest in equipment? What happens to them when you take into account depreciation on this equipment?
6. How much leverage (debt to capital) do you typically put on a company on an LBO transaction?
7. If you were CFO what would you suggest your company do with excessive cash?
8. What happens to the financial reports (Balance sheet, Income statement, Cash flow statement) if you underestimate depreciation?
9. What are the considerations to think about when advising a client on a debt product?
10. When we are advising a client on a divestiture what types of items do you think go into the pitch book?
11. Draw payout for short a call and long a put. Tell me what stock position that replicates and why.
12. Why make the distinction between levered and unlevered cash flows?
13. If a company has a P/E of 10 what is it's ROE?
14. What is cost of capital for a company's debt?
15. What is the impact to cash flows if accured salaries increases by $10 million?
16. If I promised to give you a $1 every year for the rest of your life, what is that worth today?
17. Why is yield to maturity considered a flawed metric?

For more brain teasers, check out our previous post on interview questions posed by consulting companies, as well another concentrating on asset managers, commercial banks, private wealth managers and other finance firms.