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. 019How do you assess earnings quality?AccountingHardtechnicalMoody'sCorporate Finance · New York · 2018MorningstarEquity Research · Chicago · 2023

   Say this

   Compare earnings to cash. If net income is consistently above cash from operations, something is being recognised that has not been collected. Then check the accruals, the adjustments and the one-offs.

   Then walk it

   1. The headline test: cash conversion. Cash from operations divided by net income, tracked over several years. Persistent divergence is the single best red flag available from published accounts.
   2. Then working capital. Receivable days rising faster than revenue means revenue is being pushed to customers or collection is deteriorating. Inventory days rising means a write-down is coming.
   3. Then the adjustments. Compare GAAP to the company's adjusted figures and see what is being excluded. Restructuring charges taken every year for five years are not one-off, they are operating costs in disguise.
   4. Then capitalisation choices: capitalised development costs, capitalised interest, and the depreciation life. Extending useful lives flatters earnings with no economic change.
   5. Then the tax rate and the below-the-line items, since a sudden drop in the effective tax rate can manufacture an EPS beat.
   6. For a note, the useful summary is a bridge from reported earnings to what I think the sustainable earnings power is, with each adjustment listed. That bridge is often the most valuable page in a research report.

   Where candidates lose it

   Listing ratios without the organising idea. The organising idea is that accounting earnings involve judgement and cash does not, so every test is a version of comparing the two. Say that first.

   Expect next

   • What is the single best red flag?
   • How do you treat stock-based compensation?
   • Walk me through a company you thought had poor earnings quality.

   Reported by candidates at Moody's (Corporate Finance, New York, 2018); Morningstar (Equity Research, Chicago, 2023). Source: Wall Street Oasis.

2. 020Should stock-based compensation be treated as a real expense?AccountingHardtechnicalTechnology coverageLong-only asset management

   Say this

   Yes. It is a genuine cost to existing shareholders even though no cash leaves the company, because it transfers ownership. Adding it back to get to adjusted EBITDA or free cash flow overstates what shareholders actually keep.

   Then walk it

   1. The economic argument: if the company paid those employees in cash and then issued shares to raise the same amount, nobody would argue the salary was not an expense. The two are identical in substance.
   2. It shows up as dilution. Share count creeps up every year, so per-share metrics deteriorate even when totals look fine. That is the cost, and it is real.
   3. Companies obscure it by buying back stock to offset dilution and then describing the buyback as capital return. It is not; it is paying cash for compensation already granted.
   4. The practical treatment I would use: expense it fully in the earnings I value, and if I want a cash-based measure, subtract the buyback needed to keep share count flat rather than adding SBC back.
   5. The counterargument worth acknowledging: the accounting charge is based on grant-date fair value, which can be a poor estimate of the eventual cost, and the expense is lumpy. So the number is imperfect even if the principle is clear.
   6. In practice this matters most in software, where SBC can be 15 to 25 percent of revenue. Whether you expense it decides whether a company is profitable at all.

   Where candidates lose it

   Accepting the company's adjusted figure because it is what consensus uses. Research is supposed to be the check on that. Have a view, and know roughly how large SBC is as a percentage of revenue for the sector you claim to follow.

   Expect next

   • How large is it as a percentage of revenue in software?
   • How do you handle it in a DCF?
   • What does that do to the sector's valuation?
3. 078What is channel stuffing and how would you detect it?AccountingHardtechnicalForensic accounting

   Say this

   Pushing more product into distributors than end demand supports, to book revenue now. You detect it through rising receivables and distributor inventory, quarter-end revenue spikes, and a gap between sell-in and sell-through.

   Then walk it

   1. The mechanism: the company recognises revenue when product ships to the distributor, not when the end customer buys. So it can manufacture a quarter by shipping harder, often with extended payment terms or discounts as the inducement.
   2. Signal one: days sales outstanding rising, because those distributors were given longer to pay.
   3. Signal two: revenue concentrated in the last weeks of the quarter, visible in the shape of quarterly results and sometimes in disclosed monthly data.
   4. Signal three: the gap between sell-in, what the company ships, and sell-through, what end customers buy. Where both are disclosed, a persistent gap is the clearest evidence there is.
   5. Signal four: rising returns and allowances, and a growing reserve for returns, because stuffed channels eventually send product back.
   6. Corroborate externally: distributor commentary, channel checks, and industry data on retail sales. And watch for the reversal, since a stuffed quarter borrows from the next one, so the pattern is a beat followed by a miss.

   Where candidates lose it

   Describing the concept without the detection method. The examinable content is the specific evidence, receivable days, quarter-end concentration and the sell-in versus sell-through gap. Name at least three.

   Expect next

   • What other revenue recognition games should you watch for?
   • How would you check distributor inventory?
   • How do you confront management about it?

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.