Equity Research interview preparation

Questions

100

Traced to a firm

72

Firms

45

Updated

September 2026

Asked at

All firmsMorningstar12Man Group6Balyasny Asset Management5BLBlackRock5FTFranklin Templeton5MSCI5Jefferies4CSCredit Suisse3Fidelity Investments3Moody's3Perella Weinberg Partners3Point723S&P Global3The Vanguard Group3WMWellington Management3Advent International2Apollo Global Management2Bank of America2Carlyle Group2DED.E. Shaw2Houlihan Lokey2HSBC2Piper Sandler2Sequoia Capital2SSState Street2Viking Global Investors2WBWilliam Blair2ACAQR Capital Management1BGBaupost Group1BMBNY Mellon1Centerview Partners1Coatue Management1Goldman Sachs1GSGuggenheim Securities1HWHarris Williams1Insight Partners1Invesco1Mizuho1Moelis & Company1MSMorgan Stanley1PIMCO1SCSchroders1Scotiabank1T. Rowe Price1TSTruist Securities1

Topic

All topicsResearch process9Stock pitch6Company analysis8Investment philosophy5Valuation14Modelling2Portfolio and risk8Macro8Sector knowledge2Accounting8Career and fit12Industry knowledge6Quantitative research1Sector: technology3Sector: consumer1Sector: healthcare1Sector: energy1Sector: financials2Sector: industrials1Case and estimation2

Level

AnyCoreIntermediateHard

Type

AnyTechnicalCaseFitBrainteaserMarket view

1. 018What is the effect on the three statements of selling an asset?AccountingIntermediatetechnicalJefferiesEquity Research · New York · 2026

   Say this

   Depends on the sale price versus book value. Sell an asset with a book value of $100 for $120: you book a $20 gain, taxed; cash rises by the proceeds less the tax; and the asset leaves the balance sheet at its book value.

   Then walk it

   1. Income statement: a $20 gain. At 25 percent tax, net income rises $15.
   2. Cash flow: start at net income plus $15, reverse out the $20 non-cash gain in operating, then show the full $120 proceeds in investing. Net cash movement is $115, which is the proceeds less $5 of tax.
   3. Balance sheet: cash up $115, asset down $100, retained earnings up $15. It balances.
   4. For a research analyst the follow-through matters more than the mechanics: the gain is non-recurring, so it must be stripped out of the earnings base before you apply a multiple.
   5. And you lose the asset's future earnings, so the forecast has to come down. A company that beats on a disposal gain while its operating business shrinks is exactly the kind of thing a research note should call out.

   Where candidates lose it

   Getting the mechanics right and ignoring the analytical point. On the research side, the expected addition is that the gain is non-recurring and that forward earnings fall with the disposed asset.

   Expect next

   • How would you adjust your earnings base for it?
   • What if they sold it below book value?
   • How do you treat a company that regularly books disposal gains?

   Reported by candidates at Jefferies (Equity Research, New York, 2026). Source: Wall Street Oasis.

2. 050What is the difference between accounting profit and economic profit?AccountingIntermediatetechnicalCredit research

   Say this

   Accounting profit subtracts explicit costs. Economic profit also subtracts the cost of the equity capital employed. A company can report strong net income and still be destroying value if it earns less than shareholders' required return.

   Then walk it

   1. Economic profit equals NOPAT less a capital charge, where the charge is invested capital times WACC. Equivalently, invested capital times the spread between ROIC and WACC.
   2. The insight: equity is not free, but accounting treats it as though it is. Interest appears on the income statement; the cost of equity never does.
   3. So a business earning 6 percent on capital with a 9 percent cost of capital reports a profit while shredding value every year. That is extremely common in capital-intensive industries.
   4. It reframes growth: growth is only good when the spread is positive. For a negative-spread business, growing the capital base accelerates the destruction, and the value-maximising action is to shrink and return cash.
   5. It is the basis of EVA-style frameworks and of how thoughtful investors judge capital allocation, which is often the single biggest determinant of long-run returns.
   6. The practical use in research: plot ROIC minus WACC against the valuation multiple across a sector. The companies trading at a premium with a negative spread are where the mispricing usually sits.

   Where candidates lose it

   Defining the terms without drawing the conclusion about growth. The payoff of this concept is that growth destroys value when the spread is negative, and that is what makes it worth asking about.

   Expect next

   • So should that company grow?
   • How does this affect how you judge management?
   • Where does this show up in a valuation?
3. 077A company's revenue is growing but its cash flow is not. What is happening?AccountingIntermediatetechnicalCredit research

   Say this

   Almost always working capital or revenue recognition. Either the company is selling to customers who are not paying, building inventory it has not sold, or recognising revenue ahead of the cash.

   Then walk it

   1. Check receivable days first. Rising days sales outstanding means sales are being made on easier terms, or to weaker customers, or channel-stuffed into distributors.
   2. Then inventory days. Building inventory ahead of demand consumes cash and usually precedes a markdown.
   3. Then payables. If days payable outstanding is falling, suppliers have tightened terms, which is often a sign they are worried about the company.
   4. Then revenue recognition policy. Percentage-of-completion accounting, long-term contracts and bill-and-hold arrangements all allow revenue well before cash.
   5. Then capitalisation: if development costs or contract acquisition costs are being capitalised, profit is protected while cash is spent.
   6. Growth itself explains some of it legitimately: a fast-growing business funds working capital, so cash lags revenue by construction. The diagnostic question is whether the working capital intensity, measured as a percentage of revenue, is stable or deteriorating. Stable is growth; deteriorating is a problem.

   Where candidates lose it

   Concluding fraud immediately. Fast growth legitimately consumes cash. The discriminating test is whether working capital as a percentage of sales is stable or worsening, and saying that distinguishes analysis from alarm.

   Expect next

   • How would you tell growth from deterioration?
   • What is channel stuffing and how would you spot it?
   • What would you ask management?
4. 080How do you treat one-off items when building your earnings base?AccountingIntermediatetechnicalAsset management

   Say this

   Exclude genuinely non-recurring items, but be sceptical about what qualifies. The test is whether a similar item has appeared in previous years. Recurring one-offs are operating costs with a flattering label.

   Then walk it

   1. Genuinely one-off: a legal settlement, a disposal gain, a natural disaster loss, a one-time tax item. These should come out of the earnings base you value.
   2. Suspect: restructuring charges. If a company has taken restructuring charges in seven of the last eight years, restructuring is what the company does, and the charge belongs in earnings.
   3. Also suspect: impairments, which people exclude as non-cash. An impairment is an admission that capital previously deployed was wasted, so excluding it from history while keeping the acquired revenue flatters the return on capital.
   4. The method: build a five-year table of every adjustment the company made, and see which categories repeat. That table is often the most revealing exhibit in a research note.
   5. Be symmetric. Analysts reliably exclude one-off costs and quietly keep one-off gains. Applying the same standard in both directions is the discipline.
   6. And decide once, then apply consistently across the whole comparable set, or your multiples are not comparable.

   Where candidates lose it

   Accepting the company's adjusted number. The whole point of independent research is to make your own judgement about what is recurring, and the five-year adjustment table is the evidence for it.

   Expect next

   • How do you treat impairments?
   • What if the company adjusts for stock-based compensation?
   • How would that change the multiple you apply?

Firm tags come from public, anonymous candidate reports on Wall Street Oasis: strong signal, not sworn testimony. Firms are named as the places a question was reported, not as partners of Fin Maverick. Answers are written for this page to show how to think out loud; they are not scripts to recite.