Investment Banking Analyst interview questions, with worked answers

How to use these questions

Rounds mix technical questions, a case or a modelling test, and questions about you, the deals you followed and why this team. Practise the technical answers out loud until they are short and in order. For the rest, use a deal you worked on or followed closely, your part in it and what you learned, without anything confidential.

What an investment banking analyst is expected to know

• Valuation: valuationValue a company with cash flows, trading peers and past deals, and explain why the methods differ. with discounted cash flows, trading peers and past deals.
• Models: financial modellingBuild and check three-statement, merger and buyout models quickly, with clear inputs and no hard-coded numbers. from three statements to buyout and merger models.
• Deals: how an M&AKnow how a sale, a purchase or a merger runs, from the first pitch to signing and closing. process and a share or bond issueKnow how companies raise equity and debt, and what investors look for in each. run.
• Craft: ExcelFast, checked spreadsheets: models, tables and charts that a senior banker can follow at a glance., pitch pagesBuild pitch books and presentations to the bank's standard, page after page, without errors. and reading accountsRead annual reports and accounts closely, and adjust figures for one-off items. without errors.

The tools are named in ads side by side and none is a must everywhere: Excel and PowerPoint every day, with FactSet, S&P Capital IQ, Bloomberg or Dealogic for market and deal data. Interviewers care that you check what a platform gives you, not which one you used.

Valuation

What is the difference between enterprise value and equity value?

What they check: the first idea of every valuation.

Short answer: "Enterprise value is the value of the whole business to everyone who funds it, lenders and shareholders. Equity value is what belongs to the shareholders alone. To go from enterprise to equity value you subtract net debt, the debt minus the cash, and adjust for items such as minority interests."

The full answer: Use enterprise value with figures before interest, such as sales or EBITDA, and equity value with figures after interest, such as net profit; mixing them is a common mistake.

A weak answer: "They are the same thing." Follow-up: "The company raises new debt and keeps the cash. What happens to both values?"

Walk me through a discounted cash flow valuation.

What they check: the core method, in order.

Short answer: "I forecast the free cash flows of the business for several years, estimate a terminal value for the years after, and discount both to today at the WACC. That gives the enterprise value; I subtract net debt to reach the equity value and divide by the shares."

The full answer: The terminal value, the value of all years after the forecast, is often most of the result, so test it with both a growth method and an exit multiple.

A weak answer: "Discount the profits." Follow-up: "Which assumption moves your result most?" Say how you would show it.

How do you estimate the WACC?

What they check: the rate behind every DCF.

Short answer: "The WACC, the weighted average cost of capital, mixes the cost of equity and the cost of debt after tax by their weights in the target capital structure. The cost of equity usually comes from a risk-free rate plus the company's market risk."

The full answer: Use market values for the weights and a structure the company is likely to keep; small changes in the WACC move the result a lot.

A weak answer: "I use the interest rate on its loans." Follow-up: "Why is the cost of equity higher than the cost of debt?"

How do you choose comparable companies and precedent transactions?

What they check: judgement behind a multiples valuation.

Short answer: "Comparable companies are listed peers of similar business, size, growth and margins; precedent transactions are past deals for similar businesses. I start wide, cut to the closest, and say why each is in or out. Past deals often show higher multiples because a buyer pays for control."

The full answer: Check that every multiple uses the same kind of figure and period; one wrong row moves the average.

A weak answer: "Every company in the sector." Follow-up: "Your peers trade at very different multiples." Say how you explain it.

Models and deals

How do the three financial statements link together?

What they check: the logic of every model.

Short answer: "Net profit from the income statement starts the cash flow statement and adds to retained earnings on the balance sheet. The cash flow statement adds back items such as depreciation and takes off investments and working capital, and its ending cash is the cash on the balance sheet, which must balance."

The full answer: Working capital is the money tied up in stock and unpaid customer bills, less what the company owes its suppliers; a rise uses cash.

A weak answer: "They are separate reports." Follow-up: "Depreciation rises by ten. Walk me through the three statements."

What is a leveraged buyout, and what drives its returns?

What they check: the deal type behind many mandates.

Short answer: "A leveraged buyout is a purchase paid largely with debt, usually by a private equity fund, repaid from the company's cash. Returns come from paying a sensible price, growing profit, paying down debt and selling later at a good multiple."

The full answer: In an LBO model, test what price the buyer can pay for its target return; that is often what a seller's bank needs to know.

A weak answer: "Buying with a loan." Follow-up: "Interest rates rise. What happens to the price a fund can pay?"

How do you tell whether a merger is accretive or dilutive?

What they check: the question boards ask about every share deal.

Short answer: "A deal is accretive if the buyer's earnings per share rise after it and dilutive if they fall. I compare the earnings the target adds, net of financing costs, with the new shares issued, and add the savings the buyer expects."

The full answer: Accretion is not value: a deal can raise earnings per share and still pay too much. Say both.

A weak answer: "If the target makes a profit, it is accretive." Follow-up: "The buyer pays all in shares at a low share price." Say what changes.

Walk me through a sale process and the analyst's part in it.

What they check: knowing what the job is day to day.

Short answer: "Pitch, preparation, marketing to buyers, due diligence, offers and signing. The analyst builds the model and valuation, drafts the teaser and memorandum, tracks every buyer, runs the data room, the online store of documents buyers study, and keeps the question lists."

The full answer: Due diligence is the buyers' detailed check of the business before they commit; the analyst's lists and answers keep it moving.

A weak answer: "The analyst does the slides." Follow-up: "A buyer asks for a document the client does not want to share." Say what you do.

What happens in an IPO, and what does the bank do?

What they check: the equity side of capital markets.

Short answer: "In an initial public offering a company lists its shares and sells them to investors for the first time. The banks help prepare the company, write the prospectus with lawyers, value the shares, market them to investors and set the price from their demand."

The full answer: Debt raises follow similar steps with bond investors and rating agencies; say which kind of deal you followed.

A weak answer: "The company goes on the stock market." Follow-up: "Demand is weak the week before pricing." Say what the options are.

Exactness, confidentiality and the job

You find an error in a pitch book an hour before the client meeting. What do you do?

What they check: honesty and calm under a deadline.

Short answer: "I tell the associate at once, with the right figure and every page it touches, and fix it with them. Then I check how it happened so the same check catches it next time."

The full answer: A wrong number in front of a client costs more trust than a late page; banks know analysts make mistakes and judge how they are handled.

A weak answer: "Nobody will notice." Follow-up: "The error is in a page the managing director already sent." Say what you do.

How do you keep information about a deal confidential?

What they check: the rule that protects clients and markets.

Short answer: "Deals have code names, documents stay in approved systems, and I discuss them only with people on the deal. I never trade in shares I might know something about and follow the bank's rules on private information, which separate deal teams from trading."

The full answer: Insider dealing rules apply in every market; breaking them can end a career and lead to prosecution.

A weak answer: "I only tell friends I trust." Follow-up: "A friend asks whether a company in the news is your client." Say what you answer.

The hours on live deals are long. How do you plan to handle them?

What they check: that you know what the job asks and have thought about it.

Short answer: "I know analysts often work late evenings and some weekends while a deal is live. I plan the rest of my life around quieter weeks, keep my work organised so late changes are quick, and ask early when two deadlines clash."

The full answer: Ask the team about its hours and its rules on time off; a good answer to you is also a good sign about the team.

A weak answer: "I never need sleep." Follow-up: "Two associates send you urgent work at the same time." Say what you do.

Pick a sector and tell me about a recent deal in it.

What they check: interest in the market, not only the technical side.

Short answer: "Name a published deal, the buyer and seller, the reason for the deal, the price and multiple where they were published, and one risk the market raised. Say what you would have looked at as an analyst on it."

The full answer: Prepare two deals in the bank's main sectors and know the big trends there.

A weak answer: "I do not follow deals yet." Follow-up: "Was the price too high?" Say how you would judge it.

Data and AI in deal work

Where can AI help an analyst, and where would you not trust it?

What they check: judgement about tools that can be fast and wrong.

Short answer: "AI tools can summarise filings and research, draft company profiles and find peers faster. I would check every figure against the source, never put client information into a tool the bank has not approved, and still build and test the model myself."

The full answer: The analyst's value is numbers that tie out; any tool that speeds up the first draft makes the checks more important, not less.

A weak answer: "AI will build the models." Follow-up: "A summary gives a wrong debt figure." Say how you would catch it.

Associate rounds

As an investment banking associate, how would you check an analyst's model before it goes to a client?

What they check: the step from building to reviewing.

Short answer: "I check the inputs against the sources, follow the main links through the three statements, test the result with a few changes to see that it moves sensibly, and look for hard-coded numbers. Then I go through what I found with the analyst so they learn the checks."

The full answer: Associates manage the analysts' work and the vice president's deadlines at once; say how you plan both.

A weak answer: "I trust the analyst." Follow-up: "The model balances but the valuation looks too high." Say where you look.

As an associate on two live deals, how would you plan the analysts' work?

What they check: running people and deadlines, the core of the associate step.

Short answer: "I list every deliverable with its deadline and owner, agree priorities with the vice presidents when two deals clash, and give each analyst clear tasks with the sources and the format. I check in early in the day so problems surface before the evening."

The full answer: Protect the analysts' time where you can; a team that plans its weeks makes fewer mistakes late at night.

A weak answer: "Everyone works until it is done." Follow-up: "A client moves a deadline forward by two days." Say what you change.

Your CV for these questions

Each line on your CV invites the questions above: which deals, which models, which pitches and what you did yourself. Give those stories a line each, written so a banker wants to hear more:

Hold your CV against an investment banking analyst job you want with the free score; the area it finds thin is the one to drill first, with a deal told without anything confidential.