Investment Banking interview preparation

Questions

100

Traced to a firm

100

Firms

46

Updated

September 2026

Asked at

All firmsTSTruist Securities10Rothschild & Co8Centerview Partners7CSCredit Suisse7HWHarris Williams6Houlihan Lokey6Lazard6Mizuho6Barclays5Citi5Deutsche Bank5Evercore5Moelis & Company5MSMorgan Stanley5Piper Sandler5RCRBC Capital Markets5Goldman Sachs4Nomura4TD Securities4Bank of America3GSGuggenheim Securities3J.P. Morgan3Jefferies3Moody's3Perella Weinberg Partners3WPWarburg Pincus3WBWilliam Blair3HSBC2Lincoln International2Scotiabank2TPTPG2UBS2Wells Fargo Securities2Advent International1Apollo Global Management1Bain Capital1Balyasny Asset Management1BLBlackRock1BPBNP Paribas1General Atlantic1Invesco1Morningstar1PIMCO1STSociété Générale1SSState Street1WMWellington Management1

Topic

All topicsAccounting14Valuation21M&A10Markets and deals10Capital markets3LBO8Leveraged finance3Restructuring2Credit3Debt capital markets2Capital structure2Case and estimation11Brainteasers6Fit5

Level

AnyCoreIntermediateHard

Type

AnyTechnicalCaseBrainteaserFitMarket view

1. 003Walk me through the three statements at the point of purchase and then after year one, given $100 of deferred revenue over two years.AccountingHardsuperdayCenterview PartnersInvestment Banking · New York · 2026Piper SandlerInvestment Banking · Houston · 2026

   Say this

   At the moment of sale, cash goes up $100 and deferred revenue, a liability, goes up $100. Nothing touches the income statement yet. After year one, $50 is recognised as revenue, so the liability halves and earnings finally show up.

   Then walk it

   1. Day one: cash up $100 on the asset side, deferred revenue up $100 on the liability side. Income statement untouched, because you have been paid but have not delivered.
   2. Year one: recognise $50 of revenue. At a 25% tax rate that is $37.50 of net income, assuming no costs for simplicity.
   3. Cash flow: net income up $37.50, then a working capital adjustment of minus $50 as deferred revenue unwinds. So cash from operations is minus $12.50 for the year, which is just the tax you paid.
   4. Balance sheet: cash down $12.50 from the year-one peak, deferred revenue down to $50, retained earnings up $37.50.
   5. The economic story is that a subscription business collects cash long before it books profit. That is why deferred revenue growth is a leading indicator.

   Where candidates lose it

   Recognising the revenue on day one. Cash received is not revenue earned. Also, candidates forget the working capital drag in year one and end up with a balance sheet that does not balance. Do the liability and the revenue in the same breath.

   Expect next

   • Would you rather own a business with growing or shrinking deferred revenue, and why?
   • How does deferred revenue affect a DCF?
   • What happens to deferred revenue in an acquisition?

   Reported by candidates at Centerview Partners (Investment Banking, New York, 2026); Piper Sandler (Investment Banking, Houston, 2026). Source: Wall Street Oasis.

2. 030Walk me through what happens to WACC when leverage rises, and tell me whether shareholder value actually changed.ValuationHardsuperdayCenterview PartnersInvestment Banking · New York · 2026

   Say this

   WACC falls at first, because you are swapping expensive equity for cheaper tax-deductible debt, then rises again as distress risk takes over. So there is a U shape. Whether shareholder value changed depends on whether the tax shield outweighs the distress cost.

   Then walk it

   1. Early leverage lowers WACC because debt is cheaper than equity and interest is deductible. The tax shield is a genuine transfer of value from the government to the capital providers.
   2. But as leverage rises, equity gets riskier, so cost of equity climbs. Lenders also reprice, so cost of debt climbs. Eventually both swamp the tax benefit and WACC turns back up.
   3. In a world with no taxes and no bankruptcy costs, Modigliani-Miller says the value of the firm is unchanged and you have only reshuffled claims. That is the reference case.
   4. In the real world the tax shield adds value and financial distress subtracts it, so there is an optimum somewhere in the middle. That is the whole theory of capital structure.
   5. So the honest answer to the second half is: shareholder value changed, but not because WACC fell. It changed because of the tax shield net of distress and agency costs. Falling WACC is a symptom, not the cause.

   Where candidates lose it

   Saying 'WACC falls so value goes up, therefore infinite leverage is optimal'. The interviewer asked the second half specifically to catch that. You must separate the mechanical WACC effect from the economic source of value.

   Expect next

   • So what is the optimal capital structure?
   • Can debt ever be more expensive than equity?
   • Why does Modigliani-Miller not hold in practice?

   Reported by candidates at Centerview Partners (Investment Banking, New York, 2026). Source: Wall Street Oasis.

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.