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. 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.

3. 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.

4. 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.

5. 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.

6. 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.

7. 039Would an increase in price or an increase in volume be more preferable when you are trying to deliver synergies?M&AHardsuperdayLazardMergers and Acquisitions · New York · 2026

   Say this

   Price, almost always. A price increase drops straight to the bottom line with no incremental cost, while a volume increase carries variable cost, working capital and often capacity investment with it.

   Then walk it

   1. A dollar of price is a dollar of gross profit. A dollar of volume is a dollar times the gross margin, so at a 40 percent margin you need two and a half times the revenue to get the same profit.
   2. Volume also consumes cash. More units means more inventory and receivables, and eventually more capacity, so free cash flow lags the revenue.
   3. Price is also faster. You can reprice a portfolio in a quarter; winning share takes years.
   4. The counterargument, and I would raise it: price synergies are much harder to defend to regulators, because raising prices post-merger is precisely what antitrust authorities are watching for. Volume and cost synergies are safer ground in a filing.
   5. Price is also fragile. It invites competitive response and it can accelerate customer churn, so the durability is lower even though the immediate flow-through is better.

   Where candidates lose it

   Answering only with the margin arithmetic. The regulatory dimension is what makes this an M&A question rather than a maths question, and at a firm like Lazard that is the half they are listening for.

   Expect next

   • How would you defend price synergies to a regulator?
   • Which synergies do you actually put in the model?
   • Why do most deals miss their synergy targets?

   Reported by candidates at Lazard (Mergers and Acquisitions, New York, 2026). Source: Wall Street Oasis.

8. 042What is the difference between management rollover and management incentives?M&AHardtechnicalCitiMergers and Acquisitions · New York · 2026

   Say this

   Rollover is management reinvesting its existing equity into the new deal instead of cashing out. Incentives are new equity granted to management going forward, usually options or a management incentive plan that vests on performance.

   Then walk it

   1. Rollover is backward-looking value. Management already owns shares; instead of taking the cash, they roll some percentage into the new capital structure alongside the sponsor.
   2. It reduces the sponsor's cheque size, which is helpful, and it signals confidence, which buyers care about. It can also be tax-deferred, so management has a reason to want it.
   3. Incentives are forward-looking and dilutive to the sponsor. A typical management incentive plan is five to fifteen percent of equity, vesting on time and on a return hurdle.
   4. In a model they sit in different places. Rollover is a source of funds in the sources and uses table. The incentive pool is dilution to the sponsor's exit proceeds, so it reduces the sponsor's IRR, not the entry price.
   5. The reason both exist: rollover aligns management on the downside because their own money is at risk, and the incentive plan aligns them on the upside. A sponsor wants both.

   Where candidates lose it

   Conflating the two, or putting the incentive pool in sources and uses. Rollover funds the deal; incentives dilute the exit. Getting that placement right is what the question is actually testing.

   Expect next

   • How does the incentive pool affect the sponsor's IRR?
   • How much rollover would you expect management to do?
   • Where does rollover sit in the sources and uses?

   Reported by candidates at Citi (Mergers and Acquisitions, New York, 2026). Source: Wall Street Oasis.

9. 048If a company is dual listed, which market should it raise in?Capital marketsHardtechnicalCSCredit SuisseInvestment Banking · Mumbai · 2021

   Say this

   Wherever the cost of capital is lowest after all frictions, which in practice means wherever the natural investor base is. That is usually the market with deeper liquidity in your sector and better sector comparables.

   Then walk it

   1. Start with valuation. If your sector trades at a higher multiple in one market because that market has the specialist investors and analysts, you raise there. Issuing where you are better understood is cheaper capital.
   2. Then liquidity. A deeper market absorbs a large primary issue with less price impact and a tighter discount to the last close.
   3. Then the frictions: listing and ongoing compliance cost, disclosure regime, index eligibility, and withholding tax treatment for the investors you are targeting.
   4. Currency and use of proceeds matter too. If you are funding capital expenditure in rupees, raising dollars creates an exposure you then have to hedge or live with.
   5. For an Indian issuer the concrete version of this is: domestic listing gives you index inclusion and a domestic mutual fund and retail bid, while an overseas raise can offer a better multiple for a technology story and access to larger institutional tickets. The answer follows the investor base, not national pride.

   Where candidates lose it

   Answering 'whichever has the higher share price'. Price levels across listings converge through arbitrage. The real question is where the marginal investor is and what the all-in cost of capital is after tax and compliance.

   Expect next

   • What are the differences between an India listing and a US listing?
   • What makes a good IPO environment?
   • How would fungibility between the two lines affect your answer?

   Reported by candidates at Credit Suisse (Investment Banking, Mumbai, 2021). Source: Wall Street Oasis.

10. 058What type of company is a good candidate for a dividend recapitalisation?LBOHardtechnicalRothschild & CoInvestment Banking · London · 2026

    Say this

    One that has already deleveraged meaningfully, has very stable cash flow, and has no near-term need for its balance sheet. Typically a sponsor-owned asset two or three years into the hold where the exit has been delayed.

    Then walk it

    1. The mechanical precondition is headroom. The company must have paid down enough debt that re-levering back to its original multiple is still something the credit market will fund.
    2. Cash flow has to be genuinely stable, because you are removing the cushion. Contracted revenue, low cyclicality, low CapEx.
    3. No competing call on capital. If the company needs to fund a plant or an acquisition, the cash should go there instead.
    4. The motivation is almost always sponsor-side: fund life is advancing, the exit window is shut, and the sponsor wants to de-risk and crystallise part of the return. It resets the IRR clock because cash returned early is heavily weighted.
    5. And the honest downside: nothing about the operating business improved. Leverage went back up, the equity cushion is thinner, and if the cycle turns the company is more fragile. Lenders price that, and the covenant package usually tightens.

    Where candidates lose it

    Describing the mechanics but not the motive. This question is really asking whether you understand sponsor incentives and fund life. And you should name the downside, because a banker who pitches a recap without acknowledging the fragility is not credible.

    Expect next

    • How does it affect the sponsor's IRR?
    • Why would lenders agree to it?
    • What happens if the cycle turns afterwards?

    Reported by candidates at Rothschild & Co (Investment Banking, London, 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.