One question we receive a lot from students and professionals alike, given the many courses flooding the market, is which interview course is the best in the industry for breaking into investment banking.The following table and comparison present a comparison between the top three resource providers: the Wall Street Oasis (WSO), WallStreetPrep (WSP), and Mergers & Inquisitions (M&I). The lower the price, the higher is the return as the repayment is constant regardless of its price. How to answer the question "Why Investment Banking? This has allowed me to develop a comfort speaking in public situations, and with people, I don't know or have just met. Forbes has written on it. What makes a strong response depends on your background and narrative, but there are a few general objectives you want to achieve through your answer: This guide will walk through how to tackle this question in a way that will help you stand out from the crowd.. Talk about a skill that is unique to you (something that makes you memorable) and that cannot be documented on a resume. This is similar to the 'What are your strengths?' What are some of the major macro factors that can affect the spreads on corporate bonds? Sample Answer 1:An IPO is the first public sale of stock in a previously private company. It's also a dumb question because you're interested in their bank for simple reasons: because they gave you an interview (or a potential interview) and because finance is a prestigious industry where you can make a lot of money. 12. How would you calculate the WACC of a private company? Answer:First, turn on two switches: call them Switch 1 and Switch 2. This comparison explains why we believe WSO's IB Prep Course remains the gold standard in the industry, with features unmatched by competitors. A good example: I went to school to learn how to design cars, but after my first internship I realized that I like interacting with clients directly and pursued full-time roles in B2B sales. If you say your favorite class was "dancing", why are you looking to go into finance? The following free WSO IB interview guide is a comprehensive tool designed to cover every single aspect of the interview process, guiding you from the very beginning to the very end. Why Investment Banking? - What Investment Bankers Want to Hear Thats one of the things that attracted me to investment banking in the first place. Written by Scott Powell Published December 1, 2018 Updated June 27, 2023 To complete the deal, Company A must issue 6 ($150 / $25.00) new shares which means that the combined share count after the deal is 16 (10 + 6). Address: 71-75, Shelton Street, London, WC2H 9JQ UK. Midstream. Sample Answer:You should use the market value of equity always because the book value is not adjusted once it is recorded in the books at the time of issue of the shares. Talk about past projects that show you being successful in both types of roles. This shows us the beta of the firm's equity had it not used any leverage in its capital structure. Sample Answer:EBITDA and free cash flow represent cash flows that are available to repay holders of a company's debt and equity, so a multiple based on one of those two metrics would describe the value of the whole business from the perspective of all its investors. Why UBS? | Wall Street Oasis Discover your next role with the interactive map. Assuming operating income is EBIT, add back depreciation (a non-cash expense) and deduct CAPEX to get Unlevered Free Cash Flow (UFCF) = 35. Read it over, perfect your entry and learn how to leave a lasting impression on your interviewer from the get-go. OFS 4. The purpose of both is to provide advisory on transactions, mergers, and acquisitions and to arrange (and sometimes even provide) financing for these transactions. Some of them are: Sample Answer:This is possible if working capital erodes (such as increasing accounts receivable, lowering accounts payable, lower inventory turnover) or the company is growing so fast that it's unable to raise enough capital to fund operations. The best way to obtain the necessary expertise is through our financial modeling and valuation courses. Sample Answer:If we assume there is no minority interest or preferred stock, then Net Debt will be $80mm $40mm, or $40mm. Indeed Editorial Team Updated 20 March 2023 If you're applying for investment banking roles, prepare for interviews by contemplating your motivations for working in finance. As such, the interview consists of a majority of behavioral questions (as covered above), with some banks not even asking a single technical question to candidates. The interviewer wants to see that you have some core investment banking skills and can handle a bit of a challenge. Company Registration: 14228969. Revenue - expenses = gross profit and gross profit/revenue = gross margins. The market has a beta of 1, and hence, investments that are more volatile than the market have a beta greater than 1 while those that are less volatile have a beta less than 1. Have a concise 30-second pitch prepared. If you can, bring up a strength that doesn't appear on your resume but could catch attention. "Tell us why you want to work in {the industry you are interviewing for}?" Common Investment Banking Interview Questions (With Answers) - Indeed And walk me through your thoughts. Walk me through a Leveraged Buyout (LBO) model. An increase in net working capital means more cash is tied up in the operations. The above examples illustrate how you could leverage your prior experience to answer the question and appear unique. If you are asked a question, you can answer it in a way that almost guarantees the next question, which you will be prepared for. They earn revenue through APR, interchange, late fees, and subscription fees and their primary costs are operations and marketing-related expenses. An example of this would be an automobile maker purchasing an auto parts supplier in order to gain more control of their COGS and keep costs down. 1. The following chart gives you a more comprehensive overview of how the 3 financial statements are connected to help visualize and present better for your interview: Sample Answer:The cash flow statement because it shows the actual liquidity of the company and how it is generating and using cash. It contains tips on networking, writing your cover letter and resume, and information on technical skills that are required. What is the purpose of tapering? I want to be able to use my skills and abilities to make a positive impact on the world around me. The formula for calculating TV using Gordon Growth is:Terminal Value = Expected dividend / (Required rate of return Growth rate). Accrual-based accounting is the more common method for large corporations. They want to see if you are genuinely interested, and not simply asking for the sake of asking. To learn more about interviews and the questions asked, please check out the additional interview resources below: Andy Yan is a member of WSO Editorial Board which helps ensure the accuracy of content across top articles on Wall Street Oasis. This increase in cash is because depreciation is a non-cash expense that has no impact on cash while the reduction in taxes affects the cash flow. Top 10 Investment Banking Interview Questions and Answers As the price increases, the return reduces thereby reducing the yield. Example Answers To help you prepare, we've compiled example answers to the question, "Why investment banking?" These examples should give you a good starting point for crafting your answer. Are assets recorded at cost, market value, or book value? Sample answer:I played varsity football in college. In this article, we'll break down the classic, must-know interview question: why investment banking? A multiple such as the P/E ratio, based on earnings alone, represents the amount available to common shareholders after all expenses are paid, using which you would be calculating the value of the firm's equity. Industry Leader Across the globe, it's generally recognized that Goldman Sachs is the industry leader in investment banking. Category 2: "Fit" Questions. This gives us a Levered Free Cash Flow (LFCF) of $26. By developing these skills, youll be well-positioned for success in various industries. Reduction in net income of $10 x (1 - 40%) = $6, Net increase in cash from operations of $4, Property, plant, and equipment lose $10 in value, Net decrease in assets of $6, matches the net drop in shareholder equity due to the reduction of retained earnings from the $6 is net income. When I heard about investment banking, it seemed the perfect combination of my interests and skills. The Income Statement discloses a company's revenues and expenses, which together yield net income over a period of time. Sample Answer:The three most common ways of valuing a company are: Comparable companies or multiples analysis: This is the most common way to value a company. Given an operating income of 40, depreciation of 10, a tax rate of 40%, interest expense of 15, and CAPEX of 15, what's the levered FCF? There are also other points that you should definitely avoid. Ive always been interested in working with numbers and analyzing financial data. An example of credit risk would simply be a bank lending a citizen a loan of $100,000 to start their business as an entrepreneur, on which the bank incurs the risk of not having the loan repaid should the citizen's business go bankrupt. Two steps. I know the hours will be long, but the time spent understanding and learning about XXX space would allow me to remain in finance over the longer term. The key is to quickly demonstrate that youre smart, that you understand what the job entails, and,having a full view of whats required, you still really want to do it! This can be a tricky question to answer, since you want to make sure that you're conveying the enthusiasm and knowledge that comes with having a real passion for this type of work. However, to achieve full technical mastery, it is critical you expect technical questions that are specific to each of the investment banks. Answer:It could be 26 (letters in the English alphabet), but it is only 24 because I & M are saved for Intel and Microsoft, in case they change their minds. So what hours do you expect?" The following 16 group-specific questions have been taken from our forums and company database where over 30,000 candidates have reported their interviewing experiences for different divisions within investment banks. When a company hires you, they want to think that you will stay with them. Well teach you how the pros build valuation models from scratch! In a pool of highly qualified and competitive candidates, interviewers look for more than someone who simply aces technicals. Leveraged Finance (LevFin) - Issuance of high-yield debt to firms to finance acquisitions and other corporate activities. Sometimes an interview may go extremely well, while at other times not so much so. The acquired company's assets may be used as collateral. Sed condimentum enim dignissim adipiscing faucibus consequat, urna. However, there are a number of ways in which to handle this emerging trend. The following questions have been taken from WSO's company database which is sourced from detailed IB interviews experiences of more than 30,000 people. This question is a lot more broad, giving you a lot of room to work with. It could signal that you are a flight risk to the firm. In high inflation periods, short-duration equities are favored as cash flows are eroded less by the higher cost of capital imposed by higher inflation. Sample Answer:Cash-based accounting recognizes sales and expenses when cash flows in and out of the company. We will look at the wrong answers first and then show you how to answer the question correctly. The buyer receives a step-up tax basis on the new assets it acquires, and it can depreciate/amortize them so it saves on taxes. A good way to start off is by explaining how an experience in your life has lent itself to investment banking, whether this will be your first job, or if you are going through a career change. Comps are more market-based and sensitive to environmental trends, such that in times of high valuations (such as now), comps > DCF, and in times of lower than FMV valuations, DCF > comps.