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. 005How can a company have negative EBITDA but positive free cash flow?AccountingIntermediatetechnicalWells Fargo SecuritiesInvestment Banking · Stanford · 2026

   Say this

   Working capital. If a company is collecting cash from customers faster than it pays suppliers, or taking cash upfront on subscriptions, that release of working capital can more than cover an operating loss.

   Then walk it

   1. The most common case is a business with big deferred revenue or customer prepayments. Cash arrives before the revenue is recognised, so EBITDA looks bad while the bank account fills up.
   2. A shrinking business can do it too. If you stop buying inventory and collect your receivables, you liquidate working capital into cash for a year or two.
   3. Low or zero CapEx helps, since free cash flow is after capital spending.
   4. Big non-cash charges below EBITDA do not explain it, because they are already excluded from EBITDA. It has to be balance sheet movement.
   5. The important caveat: none of this is sustainable. Working capital release is a one-time source, not an engine.

   Where candidates lose it

   Answering with 'add back depreciation'. Depreciation is already excluded from EBITDA, so that explains nothing. The answer has to live below EBITDA, which means working capital or CapEx.

   Expect next

   • Is that free cash flow sustainable?
   • Would you lend to this company?
   • What would you check on the balance sheet to test your theory?

   Reported by candidates at Wells Fargo Securities (Investment Banking, Stanford, 2026). Source: Wall Street Oasis.

2. 011What is the difference between a finance lease and an operating lease, and which one affects valuation?AccountingIntermediatetechnicalMizuhoInvestment Banking · New York · 2026

   Say this

   Under current standards both sit on the balance sheet as a right-of-use asset and a lease liability. The difference is the income statement: a finance lease splits into depreciation and interest, while an operating lease stays as a single operating expense.

   Then walk it

   1. Finance lease treats you as the economic owner. Depreciation sits in EBITDA, interest sits below it, so EBITDA is higher.
   2. Operating lease keeps the full rent inside operating expenses, so EBITDA is lower.
   3. That means two companies with identical economics can show very different EBITDA depending on classification. It directly distorts EV/EBITDA comps.
   4. For valuation, the practical answer is that you have to be consistent. Either capitalise leases for everyone and treat the lease liability as debt in the bridge, or treat rent as an operating cost for everyone.
   5. The mistake that actually costs money is adding the lease liability to net debt while also leaving rent in EBITDA. You have then charged the company twice.

   Where candidates lose it

   Answering with the pre-IFRS 16 world where operating leases were off balance sheet. That has not been true since 2019. Get the current treatment right, then make the comparability point.

   Expect next

   • So do you include the lease liability in net debt?
   • How would you compare an airline that leases its fleet with one that owns it?
   • Which industries does this distort most?

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

3. 013What is the effect on the three statements of selling an asset?AccountingIntermediatetechnicalJefferiesEquity Research · New York · 2026

   Say this

   It depends on whether you sell above or below book value. Say book value is $100 and you sell for $120. You book a $20 gain on the income statement, cash rises by $120, and the asset comes off the balance sheet at $100.

   Then walk it

   1. Income statement: a $20 gain, taxed. At 25% that is $15 of net income.
   2. Cash flow statement: start from net income at $15, reverse out the full $20 non-cash gain, then show the $120 proceeds in investing. Net cash change is $115, which is the $120 received less the $5 of tax.
   3. Balance sheet: cash up $115, the asset down $100, retained earnings up $15. It balances.
   4. The gain gets reversed out of operating cash flow because it is not operating, and the whole proceeds are shown in investing. Otherwise you would count the gain twice.
   5. If you sold below book you would book a loss, get a tax benefit, and the mechanics run the same way in reverse.

   Where candidates lose it

   Leaving the gain in cash from operations and also putting the proceeds in investing. That double-counts. The reversal of the gain in the operating section is the entire technical content of this question.

   Expect next

   • What if you sold it at exactly book value?
   • How would this show up in an equity research model?
   • Would you adjust EBITDA for the gain?

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

4. 016What are the main drivers or sensitivities in a DCF?ValuationIntermediatetechnicalTD SecuritiesInvestment Banking · New York · 2026Moelis & CompanyInvestment Banking · New York · 2026

   Say this

   The discount rate and the terminal value assumption, by a wide margin. After those, the revenue growth and margin path in the forecast years, then CapEx and working capital intensity.

   Then walk it

   1. WACC dominates because it compounds. A 100 basis point move in WACC can swing value 15 to 20 percent for a long-duration business.
   2. Terminal value is the other big one, since it is usually 60 to 80 percent of enterprise value. A 50 basis point change in perpetuity growth moves the answer materially.
   3. Inside the forecast, margin matters more than revenue for most mature businesses, because a margin point drops straight to cash.
   4. CapEx and working capital intensity matter most for capital-hungry or fast-growing companies, where growth consumes cash.
   5. The standard output is a two-way sensitivity table, WACC against exit multiple or against perpetuity growth. That grid is what actually goes in the deck, not a single point value.

   Where candidates lose it

   Listing revenue growth first. It feels intuitive but it is wrong for most businesses; discount rate and terminal value swamp it. Also, saying 'a DCF gives you the intrinsic value' as if it were one number, rather than a range you present as a football field.

   Expect next

   • Given a $10 change in revenue, COGS, or CapEx, which has the biggest impact?
   • How do you pick the perpetuity growth rate?
   • What would you do if the DCF value is miles above the trading price?

   Reported by candidates at TD Securities (Investment Banking, New York, 2026); Moelis & Company (Investment Banking, New York, 2026). Source: Wall Street Oasis.

5. 019Why do you unlever and relever beta, and why does it matter?ValuationIntermediatetechnicalHWHarris WilliamsInvestment Banking · Los Angeles · 2025

   Say this

   Observed beta reflects both the business risk and the leverage of each peer. You unlever to strip out their capital structures so you are comparing pure business risk, then relever at your target's structure.

   Then walk it

   1. Pull raw betas for the peer set. Each one is contaminated by that company's own debt load.
   2. Unlever each: asset beta equals equity beta divided by one plus one minus tax times debt over equity. Now you have pure business risk.
   3. Take the median or mean of the unlevered betas. Median is safer because one over-levered peer can drag a mean badly.
   4. Relever at your target's capital structure, or its target structure if you expect it to change.
   5. It matters because skipping it means you have imported someone else's leverage into your cost of equity. In an LBO, where structure changes by design, getting this wrong makes the whole discount rate meaningless.

   Where candidates lose it

   Knowing the formula but not the purpose. If asked 'why does it matter', the answer is comparability of business risk. Say that first, then the mechanics.

   Expect next

   • Would you use median or mean of the unlevered betas?
   • What is the beta of a slot machine?
   • How would you get a beta for a private company?

   Reported by candidates at Harris Williams (Investment Banking, Los Angeles, 2025). Source: Wall Street Oasis.

6. 022Rank the valuation methodologies from highest to lowest and explain why.ValuationIntermediatesuperdayNomuraInvestment Banking · New York · 2026

   Say this

   The usual ordering is precedent transactions highest, then DCF, then trading comps, with an LBO analysis lowest. But I would say upfront that this is a tendency, not a rule, and I can construct cases where it inverts.

   Then walk it

   1. Precedents sit highest because they include a control premium and often synergies a strategic buyer was willing to pay for.
   2. DCF usually sits above trading comps because sell-side forecasts tend to be optimistic, and because you are capturing the full life of the cash flows.
   3. Trading comps reflect minority stakes with no control, so they exclude the premium.
   4. LBO analysis is normally the floor, because a sponsor needs a target return and cannot pay for synergies it does not have.
   5. The inversions are the interesting part. In a frothy market, trading comps can exceed precedents from a downturn. And a strategic with real cost synergies can beat any sponsor, which is why the sponsor floor is not always the floor.

   Where candidates lose it

   Delivering the ranking as gospel. Interviewers ask this specifically to see whether you understand the logic or memorised a ladder. Name the ordering, give the reason for each rung, then volunteer a case where it flips.

   Expect next

   • Give me a case where trading comps exceed precedents.
   • Would Blackstone or Nike pay more to acquire Adidas?
   • Who typically pays more, a sponsor or a strategic?

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

7. 023Where is the premium baked in in precedent transactions?ValuationIntermediatetechnicalUBSInvestment Banking · New York · 2026

   Say this

   In the numerator. The transaction value is the price actually paid to take control, which already includes whatever premium the buyer offered over the unaffected share price, so the resulting multiple is a control multiple.

   Then walk it

   1. You build the multiple as transaction enterprise value over the target's EBITDA at the time. The EV is based on the offer price, not the pre-deal trading price.
   2. So the premium is inside the numerator and therefore inside the multiple itself. You do not add a premium on top afterwards.
   3. That is exactly why precedent multiples run above trading multiples for the same sector.
   4. The measurement subtlety: you compute the premium against the unaffected price, typically one day and thirty days before the first leak or announcement, not against the price after the rumour has already moved the stock.
   5. And the practical caution: if the precedent included large buyer-specific synergies, that multiple overstates what a financial buyer would pay for your client.

   Where candidates lose it

   Applying a control premium on top of a precedent transaction multiple. That double-counts and it is a genuine analyst error, not just an interview slip. Say explicitly that the premium is already in the multiple.

   Expect next

   • Against what price do you measure the premium?
   • Why do precedent multiples exceed trading multiples?
   • How stale is too stale for a precedent?

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

8. 024Walk me through how you would find comps and precedents for a company.ValuationIntermediatetechnicalEvercoreInvestment Banking · Menlo Park · 2025

   Say this

   Start from what the business actually does and who it competes with, then screen on size, growth, margin and geography. For precedents, screen deals in the same sub-sector over the last three to five years, then throw out the ones with special circumstances.

   Then walk it

   1. First pass on business model, not SIC code. A software company selling to hospitals belongs with healthcare IT, not with enterprise software generally.
   2. Practical sources: the target's own filings name its competitors, equity research initiation reports carry a comp set, and any prior deal in the space has a fairness opinion with a comp list in it.
   3. Then screen for comparability on scale, growth rate, margin profile and end-market mix. A company growing 30 percent does not belong with one growing 3 percent, whatever the sector.
   4. For precedents, filter on date, size and deal type, and separate strategic buyers from sponsors, because they pay differently.
   5. Last step is the judgement call: exclude distressed sales, minority stakes and deals with unusual structures, and be ready to defend every exclusion, because the client will ask.

   Where candidates lose it

   Saying 'I would pull them from Capital IQ' and stopping. The screen is the easy part; the defensible judgement about who belongs in the set is the job. Name your inclusion criteria and your exclusions.

   Expect next

   • How many comps is the right number?
   • Your best comp trades at a huge premium to the rest. What do you do?
   • Build me a buyer universe for this company.

   Reported by candidates at Evercore (Investment Banking, Menlo Park, 2025). Source: Wall Street Oasis.

9. 026What happens to the EV/EBITDA multiple when EBITDA increases?ValuationIntermediatetechnicalJefferiesInvestment Banking · New York · 2025

   Say this

   Mechanically the multiple falls, because the denominator grew and enterprise value is fixed at a point in time. But that is only true for an instant, because in a real market EV would move too.

   Then walk it

   1. Holding EV constant, a bigger denominator means a smaller multiple. That is just arithmetic.
   2. In reality, if EBITDA rises because the business genuinely improved, the market re-rates the equity and EV rises, often more than proportionally if growth expectations improve.
   3. So the multiple could stay flat or even expand, depending on why EBITDA moved.
   4. If EBITDA rose for a low-quality reason, say a one-off gain or an accounting change, EV should not move and the multiple genuinely compresses.
   5. The useful framing: the multiple is an output, not an input. Ask what caused the EBITDA change and the answer follows.

   Where candidates lose it

   Giving only the mechanical answer and looking pleased. The interviewer is waiting to see whether you notice that EV is not actually constant. Give both layers, and the 'why did EBITDA move' framing.

   Expect next

   • So is the multiple an input or an output?
   • What if EBITDA rose because of a one-time gain?
   • How would you adjust EBITDA for quality?

   Reported by candidates at Jefferies (Investment Banking, New York, 2025). Source: Wall Street Oasis.

10. 027How does EV/EBITDA vary across industries, and where is it larger or smaller?ValuationIntermediatetechnicalTSTruist SecuritiesInvestment Banking · New York · 2026

    Say this

    High multiples go to businesses with durable growth, high returns on capital and low reinvestment needs, so software and branded consumer sit at the top. Low multiples go to cyclical, capital-hungry, low-growth businesses like steel, airlines and utilities.

    Then walk it

    1. Software trades high because incremental revenue costs almost nothing to serve, revenue is recurring, and CapEx is minimal. Twenty times and above is normal.
    2. Branded consumer and medical devices sit in the mid to high teens on pricing power and stable demand.
    3. Industrials and distribution sit around eight to twelve, reflecting moderate growth and real capital needs.
    4. Cyclicals and capital-intensive businesses sit low, often four to seven, because earnings are volatile and most of the EBITDA gets reinvested just to stand still.
    5. The unifying logic is that EV/EBITDA is a shorthand for growth, risk and reinvestment. High multiple means the market expects EBITDA to grow and to convert into cash. Steel fails both tests.

    Where candidates lose it

    Reciting sector multiples as trivia without the underlying driver. If you cannot explain why software earns twenty times and steel earns five, you have memorised a table. The answer is cash conversion and growth durability.

    Expect next

    • Which company would have a higher multiple, asset-heavy or asset-light?
    • What is an appropriate multiple for software?
    • A company in your sector trades at half the peer multiple. Why?

    Reported by candidates at Truist Securities (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.