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. 010I am showing you a set of financials where one number is wrong. Find the error.AccountingHardsuperdayJefferiesInvestment Banking · New York · 2025

   Say this

   I would check whether the balance sheet balances first, then whether the cash flow statement ties to the change in cash, then whether the income statement subtotals add. One of those three checks will catch almost any planted error.

   Then walk it

   1. First test: do assets equal liabilities plus equity? If not, the error is a balance sheet line or a missing retained earnings flow.
   2. Second test: does ending cash on the cash flow statement match the balance sheet cash? A break here points to a missing working capital or financing line.
   3. Third test: does net income on the cash flow statement match net income on the income statement? People plant errors right there.
   4. Then sanity-check the ratios. A gross margin that moved 800 basis points with no explanation, or D&A larger than gross PP&E, is usually the plant.
   5. I would say my checks out loud as I run them, so you can see the process even if I have not found it yet.

   Where candidates lose it

   Going silent and hunting line by line. This question tests whether you have a systematic tie-out routine, not whether you have sharp eyes. Narrate the three checks; the process is the answer.

   Expect next

   • You found it. What would you do next if this were a live client model?
   • Which single ratio tells you most about earnings quality?
   • How would you audit a model you inherited from a departing analyst?

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

3. 014Walk me through what OpenAI's income statement probably looks like.AccountingHardsuperdayLazardInvestment Banking · San Francisco · 2026

   Say this

   Large and fast-growing revenue from subscriptions and API usage, a gross margin far below normal software because inference costs real compute, then enormous R&D and compute spend that puts operating income deeply negative.

   Then walk it

   1. Revenue splits into consumer subscriptions, enterprise seats, and API consumption. The API line is usage-based, so it behaves more like a utility than like seat-based SaaS.
   2. Cost of revenue is the interesting part: every query costs GPU time. That is why gross margin sits well below the 75 to 85 percent you would expect from software.
   3. Below that, R&D dominates, and most of it is training compute plus a small number of very expensive people.
   4. Sales and marketing is unusually light for the growth rate, because distribution has been largely organic.
   5. So the shape is high growth, compressed gross margin, and a big operating loss funded by capital rather than cash flow. If I were valuing it I would care most about whether inference cost per query is falling faster than usage is rising.

   Where candidates lose it

   Treating it as generic SaaS with 80% gross margins. The entire point of the question is whether you understand that inference is a variable cost of goods sold. Name that and you have answered it, even if every number you guess is wrong.

   Expect next

   • How would you value it then?
   • What would you need to believe for this to be worth its last round?
   • Compare the business model to Microsoft's.

   Reported by candidates at Lazard (Investment Banking, San Francisco, 2026). Source: Wall Street Oasis.

4. 017Given a $10 change in revenue, COGS, or CapEx, which has the highest impact on a DCF?ValuationHardtechnicalMizuhoInvestment Banking · New York · 2026

   Say this

   CapEx, because $10 of CapEx reduces cash flow by the full $10 with no tax offset. Revenue and COGS both flow through the income statement, so their effect is only $10 times one minus the tax rate.

   Then walk it

   1. A $10 increase in CapEx is a straight $10 reduction in unlevered free cash flow that year. Dollar for dollar.
   2. A $10 increase in revenue lifts EBIT by $10 only if there is no incremental cost, and after a 25% tax it is worth $7.50 of cash flow.
   3. A $10 increase in COGS reduces EBIT by $10 and costs $7.50 of cash flow after tax.
   4. So per dollar, CapEx bites hardest in the year it happens.
   5. But over the full forecast the ranking can flip, because a revenue change usually persists and compounds into the terminal value, while a one-off CapEx spike does not. If the question means a permanent change, revenue wins.

   Where candidates lose it

   Answering the arithmetic without asking whether the change is one-off or permanent. The interviewer is probing whether you understand that terminal value capitalises recurring changes. Ask the clarifying question, then answer both cases.

   Expect next

   • Is that change one-time or permanent in your answer?
   • What if the CapEx is growth CapEx that lifts future revenue?
   • Which one would you sensitise in the deck?

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

5. 020What is the beta of a slot machine?ValuationHardsuperdayRothschild & CoMergers and Acquisitions · New York · 2021Rothschild & CoGeneralist · New York · 2026

   Say this

   Zero. A slot machine's payout is random but the randomness is entirely idiosyncratic, and beta only measures the part of risk that moves with the market. Uncorrelated risk carries no beta.

   Then walk it

   1. Beta is covariance with the market divided by the variance of the market. If the payout is independent of the market, the covariance is zero, so beta is zero.
   2. The machine is enormously risky in a standard deviation sense. That is exactly the point: total volatility and systematic risk are different things.
   3. This is CAPM's central claim. The market only pays you for risk you cannot diversify away, and pure gambling risk diversifies to nothing across many pulls.
   4. The sharp extension: a casino's equity beta is clearly not zero, because discretionary gambling spend rises and falls with the economy. The machine's payout is uncorrelated; the volume of people playing it is not.
   5. So the answer is zero for the mechanism, positive for the business built on it.

   Where candidates lose it

   Answering 'very high, because it is so risky'. That confuses volatility with systematic risk and tells the interviewer you do not really understand CAPM. Get to zero fast, then earn the extra credit with the casino distinction.

   Expect next

   • So why is a casino's beta not zero?
   • How would you value your favourite animal?
   • What is your personal beta?

   Reported by candidates at Rothschild & Co (Mergers and Acquisitions, New York, 2021); Rothschild & Co (Generalist, New York, 2026). Source: Wall Street Oasis.

6. 029Can you think of an asset or company where you would not calculate a terminal value and would just forecast cash flows for a set number of years and stop?ValuationHardtechnicalBPBNP ParibasInvestment Banking · New York · 2026

   Say this

   Anything with a contractually finite life. A mine with defined reserves, a pharmaceutical asset with a patent cliff, a toll road or power plant on a concession that reverts to the state, or a single-property real estate asset you will sell.

   Then walk it

   1. A mine or oilfield has a reserve life. When the resource is gone the cash flows are gone, so a perpetuity would be fiction. You forecast to depletion and add any salvage or remediation cost.
   2. A patented drug loses most of its economics at expiry when generics enter. You forecast through the cliff and apply a steep decline, not a growing perpetuity.
   3. Concession assets like toll roads, airports and power purchase agreements have a contractual end date and often hand the asset back for nothing.
   4. Project finance generally works this way, which is why the metric is often an equity IRR over the concession rather than a perpetuity value.
   5. The test I would apply: is there a contract or a physical limit that ends the cash flows? If yes, no terminal value. Gordon growth assumes the business outlives you, and these do not.

   Where candidates lose it

   Not having a single concrete example ready. This question is easy if you can name a mine or a patent cliff, and impossible if you only know the Gordon growth formula. Have two examples ready and state the test.

   Expect next

   • How would you handle the patent cliff specifically?
   • What about remediation costs at the end of a mine's life?
   • How does this change the discount rate you use?

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

7. 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.

8. 031Can debt ever be more expensive than equity, and in what scenario?ValuationHardtechnicalTD SecuritiesCapital Markets · New York · 2025

   Say this

   Yes. In deep distress, debt yields can exceed any plausible cost of equity, because the debt is effectively pricing bankruptcy risk while the equity is a cheap out-of-the-money option on recovery.

   Then walk it

   1. The usual ordering holds because debt is senior and its interest is deductible. But it is a tendency, not a law.
   2. In distress, existing bonds can trade at yields of 20 or 30 percent. New rescue financing can price higher still, sometimes with PIK toggles and warrants on top.
   3. Meanwhile the equity has almost no value left, so the required return the market demands on the residual stub can look modest in absolute dollars. Option-like equity behaves strangely.
   4. The tax shield also disappears when there is no taxable income to shield. A company with large losses gets no benefit from deductibility, so the after-tax cost of debt equals the pre-tax cost.
   5. Rescue and mezzanine financing is the clean real-world example. Sponsors regularly choose to issue equity rather than take a 15 percent PIK instrument, precisely because the debt is dearer.

   Where candidates lose it

   Answering flatly 'no, debt is always cheaper because it is senior and tax-deductible'. That is the textbook line and the question is designed to test whether you can break it. Name distress and the loss of the tax shield.

   Expect next

   • What happens to the tax shield if the company has no taxable income?
   • Why would a sponsor prefer high yield over bank debt in an LBO?
   • How would you price rescue financing?

   Reported by candidates at TD Securities (Capital Markets, New York, 2025). Source: Wall Street Oasis.

9. 033How do you treat underfunded pensions in the bridge from enterprise value to equity value?ValuationHardsuperdayBarclaysInvestment Banking · London · 2025

   Say this

   Treat the net deficit as a debt-like item and subtract it in the bridge, but on an after-tax basis, because the contributions that eventually close the gap are usually tax-deductible.

   Then walk it

   1. The deficit is the projected benefit obligation less the fair value of plan assets. That shortfall is a real claim on the business that sits ahead of shareholders.
   2. So subtract it from enterprise value alongside debt. A buyer inheriting the plan inherits the obligation to fund it.
   3. Tax-effect it. If future contributions are deductible, the economic cost is the deficit times one minus the tax rate, not the gross number.
   4. Do not also leave pension service cost inside EBITDA and then subtract the deficit, or you have charged for it twice. Pick a lane and be consistent across every company in the comp set.
   5. The reason this matters in practice: for old industrials the deficit can be a meaningful fraction of market capitalisation, and it moves with discount rates. A falling rate environment inflates the obligation and can quietly destroy equity value.

   Where candidates lose it

   Ignoring it entirely, or subtracting it gross with no tax adjustment. Also double-counting by leaving service cost in EBITDA. Consistency across the comp set is the part that separates a real answer from a memorised one.

   Expect next

   • What if the plan is overfunded?
   • How does a change in discount rates affect the obligation?
   • Which sectors does this matter most in?

   Reported by candidates at Barclays (Investment Banking, London, 2025). Source: Wall Street Oasis.

10. 034How would you value a pre-revenue healthcare company?ValuationHardsuperdayPiper SandlerInvestment Banking · New York · 2026Moelis & CompanyMergers and Acquisitions · Los Angeles · 2022

    Say this

    A risk-adjusted DCF built asset by asset. For each drug candidate, forecast peak sales after launch, discount back, then multiply by the cumulative probability of clinical and regulatory success for that phase.

    Then walk it

    1. Value each pipeline asset separately. A Phase III candidate and a preclinical one are completely different risks and cannot share a discount rate.
    2. For each asset: estimate the addressable patient population, penetration, price and duration of therapy to build peak sales, then shape the ramp and the patent cliff.
    3. Apply probability of technical and regulatory success. Industry benchmarks run roughly 60 to 70 percent from Phase III, around 30 percent from Phase II, and low single digits from preclinical.
    4. Discount at a high rate, often 10 to 15 percent, and net off the cash burn until launch. Then sum the assets and add the cash on the balance sheet.
    5. Cross-check against what the market pays. EV per pipeline asset by phase, precedent biotech M&A, and the last private round. And say plainly that the answer is a wide range, because a single readout can move it by a factor of three.

    Where candidates lose it

    Reaching for revenue multiples when there is no revenue, or building one DCF for the whole company. The technique is per-asset and probability-weighted. If you cannot name roughly what a Phase II success rate looks like, you have not prepared the sector.

    Expect next

    • What probability would you use for a Phase II asset?
    • How do you handle the patent cliff?
    • What would you cross-check this against?

    Reported by candidates at Piper Sandler (Investment Banking, New York, 2026); Moelis & Company (Mergers and Acquisitions, Los Angeles, 2022). 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.