Investment Banking interview preparation
Every question below is either traced to a named firm from a public candidate report, or tagged at desk level when we could not trace it. Answers are written the way you would actually say them out loud — answer first, then the mechanism, then the limitation.
100 questions, mapped to the firms that asked them
- Questions
- 100
- Traced to a firm
- 100
- Firms
- 46
- Updated
- September 2026
003Walk me through the three statements at the point of purchase and then after year one, given $100 of deferred revenue over two years.Centerview 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
- 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.
- Year one: recognise $50 of revenue. At a 25% tax rate that is $37.50 of net income, assuming no costs for simplicity.
- 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.
- Balance sheet: cash down $12.50 from the year-one peak, deferred revenue down to $50, retained earnings up $37.50.
- 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.
008Walk me from revenue down to unlevered free cash flow.RBC Capital MarketsLeveraged Finance · London · 2026Centerview PartnersInvestment Banking · Menlo Park · 2025
Say this
Revenue less COGS and operating expenses gives EBIT. Tax EBIT at the marginal rate to get after-tax EBIT, add back D&A, subtract CapEx, then subtract the increase in net working capital.
Then walk it
- Start at EBIT, not net income, because unlevered means before any financing decision.
- Multiply EBIT by one minus the tax rate. This is the step people rush: you tax EBIT, not EBITDA.
- Add back D&A because it is non-cash, but note you already got its tax benefit inside the taxed EBIT.
- Subtract CapEx, which is the real cash going into the asset base.
- Subtract the change in net working capital. Growth normally consumes working capital, so this is usually negative for a growing company.
- The result is cash available to all capital providers, debt and equity, which is why you discount it at WACC.
Where candidates lose it
Subtracting interest. The moment interest appears, it is levered, not unlevered, and you have double-counted the capital structure because WACC already prices the debt. Say 'no interest, because it is unlevered' out loud.
Expect next
- What is the difference between levered and unlevered free cash flow?
- Which one do you discount at cost of equity?
- If I gave you a $10 change in revenue, COGS, or CapEx, which moves your DCF most?
Reported by candidates at RBC Capital Markets (Leveraged Finance, London, 2026); Centerview Partners (Investment Banking, Menlo Park, 2025). Source: Wall Street Oasis.
021What are the main valuation methodologies, with the pros and cons of each?Centerview PartnersInvestment Banking · Menlo Park · 2026Piper SandlerInvestment Banking · New York · 2026InvescoAsset Management · New York · 2023
Say this
Three core ones: comparable companies, precedent transactions and DCF. Comps tell you what the market pays today, precedents tell you what buyers paid including control, and a DCF tells you what the cash flows are worth on your own assumptions.
Then walk it
- Trading comps: fast, market-based, easy to defend. But no two companies are truly comparable, and if the whole sector is mispriced your answer inherits that.
- Precedent transactions: captures the control premium and what strategic buyers actually paid. But deals are stale, each had its own circumstances, and disclosure is patchy.
- DCF: the only method grounded in the actual economics, and it forces you to state your assumptions. But it is enormously sensitive to WACC and terminal value, so it can be made to say almost anything.
- Situational ones sit alongside: LBO analysis for a floor value a sponsor would pay, sum of the parts for conglomerates, NAV for asset-heavy or real estate businesses, and dividend discount for banks.
- In practice you show all of them as a football field and argue for a range, because the overlap between methods is more persuasive than any single number.
Where candidates lose it
Listing the three and stopping when the question explicitly asked for pros and cons. Also, claiming DCF is 'the most accurate'. It is the most theoretically sound and the most easily manipulated, and saying both is what makes you sound credible.
Expect next
- Rank the four methodologies from highest to lowest value and explain why.
- Which would you weight most for a company like this?
- When would you not use a DCF at all?
Reported by candidates at Centerview Partners (Investment Banking, Menlo Park, 2026); Piper Sandler (Investment Banking, New York, 2026); Invesco (Asset Management, New York, 2023). Source: Wall Street Oasis.
030Walk me through what happens to WACC when leverage rises, and tell me whether shareholder value actually changed.Centerview 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
- 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.
- 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.
- 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.
- 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.
- 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.
052How do you drive returns in an LBO?Centerview PartnersInvestment Banking · Menlo Park · 2025TPGInvestment Banking · New York · 2024
Say this
Three levers: pay down debt with the company's cash flow, grow EBITDA through revenue and margin, and exit at a higher multiple than you paid. The first two you control, the third you mostly do not.
Then walk it
- Deleveraging: every dollar of debt repaid transfers a dollar of enterprise value to the equity. At five times leverage this alone can double equity over five years with no growth at all.
- EBITDA growth: organic revenue growth, pricing, cost programmes, and bolt-on acquisitions. Bolt-ons are especially powerful because a small target bought at six times inside a platform valued at twelve times creates value on day one through multiple arbitrage.
- Multiple expansion: selling at a higher multiple, either because the market re-rated or because you made the asset more valuable, bigger, more diversified, faster-growing.
- A fourth, less discussed: the dividend recap. Refinancing to pull cash out early shortens the duration of the return and lifts IRR without any exit.
- The discipline point: a sponsor's investment committee wants to see the return work on deleveraging and EBITDA alone, with flat or lower exit multiples. Anything that only works on multiple expansion does not get approved.
Where candidates lose it
Naming only leverage. Leverage amplifies returns; it does not create them. And forgetting that IRR is time-sensitive, so the speed of the return matters as much as the size.
Expect next
- Which lever matters most?
- What would you do in the first hundred days?
- How does a dividend recap change the IRR?
Reported by candidates at Centerview Partners (Investment Banking, Menlo Park, 2025); TPG (Investment Banking, New York, 2024). 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.