How to Prepare for an Investment Banking Interview?

If you are considering a fulfilling career in investment banking, then be sure to acquire the necessary skills, gain deep knowledge, and prepare yourself for an interview. While your academic qualification will cover skill enhancement and technical learning, you must spend considerable time preparing for the interview.

Investment banking job interview tests the candidates on various parameters like technical knowledge, soft skills, readiness for the job, ability to survive in the high-pressure work environment, and more. To ace the interview, you need to prepare yourself in advance.

Investment Banking Interview Preparation

Here, we list some of the most common things you must work on for investment banking interview.

Know about the Job

Not knowing much about the position is unimpressive and offensive to an interviewer. Before entering the interview, it is important to gather information about the job role, job description, company details, etc. Also, you must be able to answer the question, “Why do you want to get into investment banking”? You can answer that this field requires extreme persistence, long hours of work, etc., but you find yourself passionate about becoming an investment banking analyst. You can narrate how you would like to build your future within this industry as you like corporate finance. Ensure to make your response impactful.

Technical Knowledge

Subject-related knowledge of investment banking and a general understanding of the industry is expected from the candidate. The interview is the time to showcase that you know the basic and advanced concepts like making financial statements like income statements, cash flow statements, balance sheets, etc. There can be many common technical skill-testing questions in the investment banking interview. If your basics are clear, you can answer the questions. Familiarize yourself with the following:

Financial Statement

Know about the three most common financial statements:

  • Balance Sheets: This chart showcases a company’s assets and liabilities. The same applies to various items like debt, equity, accounts payable, etc.
  • Income Statement: This one describes the company’s net income in a specific time frame. It also lists revenue and expenses.
  • Cash Flow Statements: This is another important financial document that exhibits an organization’s cash flow, including financing, operating, and investing activities.

WACC or Weighted Average Cost of Capital

WACC is an important term in investment banking. The candidate must know what it is and how it is calculated. WACC finds a return on investment. It is the total proportional debt and equity multiplied by the debt and equity cost.

The formula is WACC = (E/V x Re) + (D/V x Rd x (1-Tc)), where E is the equity or market value of shares, D or debt is the company’s debt market value, V or Value is the company’s capital value, Re is the equity cost, Rd is the debt cost, and Tc is the corporate tax rate.

EBITDA or Earnings Before Interest, Taxes, Depreciation and Amortization

EBITDA is, again, extremely crucial to know before your interview. One of the most potent financial performance indicators, EBIDTA, can define a firm’s earning potential.

Company value

Do you know how to calculate the value of a company? If not, then be informed. The best ways to calculate the same are:

  • Comparable Company Analysis: In this approach, you need to make a list of other companies that are like yours. Then, you can compare using factors like EBITDA, stock price, price-to-earnings ratio, etc.
  • Discounted Cash Flow Analysis: In this method of determining company valuation, you determine the company projection of its value in the future, discounted to current company values.
  • Precedent Transaction Analysis: This is also done as a comparable company analysis. However, in this type of analysis, you determine the similar companies sold to find your target company’s value.

Mergers and Acquisitions

The interviewer may ask why and when mergers and acquisitions are necessary. Know the various purposes of M&A like saving money, improving financial health, eliminating competition, gaining more power, diversifying or specializing in new technology, company expansion, etc.

Personality Skills

You will also be evaluated on your soft skills. You must hone your analytical, communication, leadership, and problem-solving skills to perform excellently in the interview. Prepare yourself with:

Introduction Questions

This includes the typical “Tell me something about yourself” question. Prepare an impressive introduction including your interests, family, previous work experience, goals and aspirations, past achievements, etc.

Interest or Hobbies

What do you like to do in your free time? Is it reading bank-related news or exploring the internet and finding some journals by successful investment bankers? Such answers can help you with bonus points.

Are you ready for the role?

Make the employer believe you are ready for challenging, fast-paced work in a high-pressure environment. Talk about the people who inspire you. Explain how you would maintain your quality work and personal life.

Wrapping up

It is a no-brainer that investment bankers work for long hours. The investment banking career path is challenging, but since the job is highly rewarding regarding growth and paycheck, it is worth the effort! So, brush up your skills and do your best in the interview!

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