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. 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.

3. 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?
4. 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?
5. 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?
6. 079Walk me through the three statements and tell me which one you would want if you could only have one.AccountingCorephone / first roundMoody'sGeneralist · New York · 2022JefferiesEquity Research · New York · 2026

   Say this

   The cash flow statement. It is the hardest to manipulate, it tells you whether the reported profit is real, and it shows you the capital allocation decisions, which reveal what management actually believes.

   Then walk it

   1. The linkage first: net income flows from the income statement to the top of the cash flow statement and into retained earnings; ending cash flows onto the balance sheet.
   2. Why cash flow: it reconciles accounting judgement back to something verifiable. Starting from net income and adjusting to cash, it exposes the accruals in between.
   3. It also contains the investing and financing sections, so you see CapEx, acquisitions, buybacks, dividends and debt movements. That is the capital allocation record in one page.
   4. The honest caveat: the cash flow statement alone does not tell you whether the business is profitable, what the margin structure is, or how leveraged the balance sheet is. You would be flying with one instrument.
   5. And it can be managed at the margin: classifying items between operating and investing, timing payments around the period end, and factoring receivables all flatter operating cash flow.
   6. But among the three, it is the one where the gap between reality and presentation is smallest, which is why it is the right answer.

   Where candidates lose it

   Picking the income statement because it shows profit. The expected answer is cash flow, and more importantly the reason: accounting profit involves judgement and cash largely does not. Give the caveat too, since the question is testing judgement, not recall.

   Expect next

   • What can still be manipulated in the cash flow statement?
   • What would you miss without the balance sheet?
   • How do you assess earnings quality from it?

   Reported by candidates at Moody's (Generalist, New York, 2022); Jefferies (Equity Research, New York, 2026). Source: Wall Street Oasis.

7. 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.