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. 057What makes a good LBO candidate?LBOCoretechnicalWPWarburg PincusPrivate Equity · San Francisco · 2014GSGuggenheim SecuritiesHealthcare · London · 2026

   Say this

   Predictable, recurring cash flow that can service debt, low capital intensity, a defensible market position, an identifiable operational improvement, and a credible exit. Cash flow stability matters more than growth.

   Then walk it

   1. Stable cash flow first, because the debt has to be serviced whatever happens. Contracted or subscription revenue, low cyclicality, sticky customers.
   2. Low CapEx, because every dollar into maintenance is a dollar not repaying debt.
   3. Strong market position and real barriers to entry, so margins survive the hold period without the company needing to outspend rivals.
   4. A visible value-creation lever: an underinvested sales function, a bloated cost base, a fragmented sector that supports a bolt-on strategy, or a non-core division to divest.
   5. And an exit that is not hypothetical. A deep strategic buyer list, or a peer set that trades publicly at a decent multiple. The best entry price in the world is worthless if nobody will buy it from you in five years.
   6. Conversely, the anti-candidate is a high-growth, cash-burning, cyclical business with heavy CapEx. It can be a great investment and a terrible LBO.

   Where candidates lose it

   Saying 'high growth' near the top of your list. Growth consumes cash and cash service is the constraint. Venture-style growth is the opposite of what an LBO needs, and saying so shows you understand why the structure exists.

   Expect next

   • Tell me about a company you like. Is it a good LBO candidate?
   • Why is high growth not necessarily good here?
   • What type of company is a good candidate for a dividend recap?

   Reported by candidates at Warburg Pincus (Private Equity, San Francisco, 2014); Guggenheim Securities (Healthcare, London, 2026). Source: Wall Street Oasis.

2. 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.

3. 059Why would a sponsor prefer to take on high yield debt to finance an LBO rather than bank debt?Leveraged financeHardtechnicalLazardGeneralist · Amsterdam · 2025

   Say this

   Flexibility. High yield bonds are typically fixed rate, bullet maturity, with no maintenance covenants and no mandatory amortisation. You pay more in coupon to buy freedom and certainty of cash flow.

   Then walk it

   1. No amortisation. Bank term loans grind down cash with mandatory repayments and a cash sweep; bonds are bullet, so all the cash stays in the business for growth or bolt-ons.
   2. Covenant-light. Bonds carry incurrence covenants that only bite when you do something, rather than maintenance covenants tested every quarter. A sponsor running a turnaround does not want a quarterly leverage test.
   3. Fixed rate. Bonds lock the coupon, so a rising rate environment does not eat the equity. Floating-rate term loans expose the deal to rate risk unless hedged.
   4. Longer tenor, usually seven to ten years against five to seven for a term loan, so no refinancing wall mid-hold.
   5. The costs, which you should name: a higher coupon, call protection that makes early repayment expensive, and a public disclosure burden. So the real answer is that sponsors use both, bank debt for the cheap senior layer and bonds for the flexible layer, and the mix depends on whether the thesis needs cash flexibility or the lowest possible cost.

   Where candidates lose it

   Answering 'because banks will not lend that much'. Sometimes true, but it misses the point. The trade is cost against flexibility, and naming covenant structure and bullet maturity is what shows leveraged finance literacy.

   Expect next

   • What is the difference between incurrence and maintenance covenants?
   • Describe the differences between private credit and bank syndicated debt.
   • What is call protection?

   Reported by candidates at Lazard (Generalist, Amsterdam, 2025). Source: Wall Street Oasis.

4. 060Describe the differences between private credit and bank syndicated debt.Leveraged financeHardtechnicalMizuhoInvestment Banking · New York · 2026MizuhoGeneralist · New York · 2026

   Say this

   A private credit loan is held by one or a handful of funds, negotiated bilaterally, priced higher but certain and fast. Syndicated debt is arranged by a bank and sold to many institutional investors, cheaper but subject to market conditions.

   Then walk it

   1. Execution certainty is the big one. A direct lender commits and holds. A bank underwrites and then has to syndicate, so the borrower carries flex risk if the market moves against them.
   2. Price: private credit typically costs 100 to 300 basis points more. You pay for speed, confidentiality and certainty.
   3. Documentation and relationship: a small lender group means you can renegotiate in a downturn with people you know. A broadly syndicated loan means hundreds of holders, some of them distressed funds who bought in at a discount and want a different outcome.
   4. Size and liquidity: the syndicated market handles the largest deals and trades in a secondary market, which matters for pricing transparency. Private credit paper is illiquid and marked by the manager.
   5. Structurally, private credit has taken a large share of mid-market and increasingly large-cap leveraged lending, which is why the market can now fund deals when the syndicated window is shut. The systemic question people are watching is whether valuations in an illiquid, manager-marked asset class are honest through a real default cycle.

   Where candidates lose it

   Describing only the price difference. The reason private credit won share is certainty of execution and flexibility of documentation, not price. If you can also name the concern about mark-to-model valuations, you sound like someone who reads the market.

   Expect next

   • Why has private credit taken share from the banks?
   • Which would you advise a sponsor to use?
   • Tell me about the two different types of loans in the broadly syndicated loan market.

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

5. 061Does PIK financing increase or decrease enterprise value?Leveraged financeHardtechnicalMoelis & CompanyInvestment Banking · Los Angeles · 2026

   Say this

   Neither, directly. Enterprise value is set by operating cash flows, and how you finance the business does not change them. PIK changes the split between debt and equity, and it grows the debt claim over time because the interest accrues.

   Then walk it

   1. PIK means pay in kind: the interest is not paid in cash, it capitalises onto the principal. So the debt balance compounds upward.
   2. Enterprise value is unaffected in theory, because EBITDA and cash flow are unchanged. Financing does not create operating value.
   3. What changes is the bridge. Net debt grows every year as interest accrues, so at a constant enterprise value the equity value shrinks over time. The equity is being eaten from below.
   4. The genuine second-order effects: PIK preserves cash today, which can fund growth and therefore raise EBITDA, so it can indirectly support value. And PIK accretion may not be cash-tax deductible in the same way, which weakens the tax shield.
   5. The practical reason it exists: it lets a struggling or fast-growing borrower avoid a cash interest burden it cannot currently service. It buys time and it is expensive. If the business does not grow into it, the accreting balance is what wipes out the equity.

   Where candidates lose it

   Saying enterprise value falls because debt went up. Debt is not part of enterprise value; it is part of the bridge to equity. Confusing the two here is the exact error the question is designed to expose.

   Expect next

   • How much would you pay for 2x your money on a 12 percent PIK with no compounding?
   • So what happens to the equity value over the hold?
   • When would a lender insist on PIK?

   Reported by candidates at Moelis & Company (Investment Banking, Los Angeles, 2026). Source: Wall Street Oasis.

6. 062What makes a company distressed, and why restructuring?RestructuringIntermediatetechnicalEvercoreRestructuring · New York · 2025Rothschild & CoRestructuring · London · 2025

   Say this

   Distress is when a company cannot service its obligations from its cash flow, or cannot refinance a maturity. Distinguish operational distress, where the business is broken, from financial distress, where a good business carries the wrong capital structure.

   Then walk it

   1. The observable triggers: interest coverage falling toward one, a covenant breach, a maturity wall it cannot refinance, bonds trading at a deep discount to par, and a credit downgrade.
   2. Financial distress means the operations work but the balance sheet does not. The fix is a balance sheet fix: amend and extend, a debt-for-equity swap, a rights issue, a liability management exercise.
   3. Operational distress means the business itself is impaired, by a lost contract, structural decline or a broken cost base. No amount of refinancing solves that; you need an operational turnaround or a sale.
   4. The distinction drives everything about the advice, so I would establish it first in any situation.
   5. On why restructuring specifically: the work is analytically harder than M&A because you are valuing the enterprise and then allocating it across a capital structure, and the negotiation is multi-party and adversarial. It is also counter-cyclical, which is a genuine reason to want to be in it.

   Where candidates lose it

   Not separating operational from financial distress. That single distinction is the core intellectual content of restructuring, and a restructuring interviewer will hear immediately whether you have it. Also, do not answer 'why restructuring' with 'because it is counter-cyclical' alone; that reads as cynical.

   Expect next

   • What is the recovery on each claim?
   • Do you understand what we actually do here?
   • What were the recent developments in the debt space?

   Reported by candidates at Evercore (Restructuring, New York, 2025); Rothschild & Co (Restructuring, London, 2025). Source: Wall Street Oasis.

7. 064What credit metrics would you look at when analysing a company like Nike?CreditIntermediatetechnicalTSTruist SecuritiesLeveraged Finance · Atlanta · 2024

   Say this

   Leverage and coverage first: net debt to EBITDA and EBITDA to interest. Then cash conversion, free cash flow to debt, and the maturity profile. For a consumer brand I would add inventory days, because that is where the trouble shows up first.

   Then walk it

   1. Leverage: net debt to EBITDA, and gross leverage too, since cash can be trapped offshore or needed for operations. For an investment grade consumer name you would expect well under two times.
   2. Coverage: EBITDA or EBIT to interest expense, and the tighter test, free cash flow after CapEx and dividends against interest.
   3. Cash conversion: free cash flow to total debt, and EBITDA to free cash flow, which tells you how much of the reported profit is real.
   4. Liquidity and maturities: cash on hand plus undrawn revolver against the next two years of maturities. A profitable company still defaults if it cannot refinance.
   5. For Nike specifically: inventory days and the gap between revenue growth and inventory growth. When inventory grows faster than sales in a branded consumer business, discounting and a gross margin hit are coming. I would also look at wholesale versus direct mix and geographic concentration.

   Where candidates lose it

   Reciting generic credit ratios and ignoring that they named a specific company. The sector-specific metric, inventory in this case, is what shows you can actually underwrite rather than recite. Always bring one metric that fits the named business.

   Expect next

   • What line items would you look at to assess creditworthiness?
   • How would you assess a good borrower?
   • How would you qualitatively assess an entity for a rating?

   Reported by candidates at Truist Securities (Leveraged Finance, Atlanta, 2024). Source: Wall Street Oasis.

8. 065What specific line items would you look at on the financial statements when evaluating creditworthiness?CreditIntermediatetechnicalRCRBC Capital MarketsCorporate Banking · New York · 2026Wells Fargo SecuritiesGeneralist · North Carolina · 2025

   Say this

   Cash flow from operations, because that is what repays debt. Then interest expense, total debt and its maturity schedule, cash, the undrawn revolver, CapEx, and the working capital lines.

   Then walk it

   1. Start with cash from operations across several years. One good year proves nothing; consistency through a downturn proves a lot.
   2. Interest expense against EBITDA gives coverage. Debt and the maturity schedule tell you when the pressure comes.
   3. Cash and the undrawn facility are the liquidity buffer. Compare them to the next 12 to 24 months of obligations.
   4. CapEx split into maintenance and growth. Maintenance CapEx is non-discretionary, so it competes with debt service. Growth CapEx can be cut in a bad year, which is a real source of flexibility.
   5. Then the working capital lines, receivables, inventory and payables, because deterioration shows up there before it reaches the income statement. Rising receivable days means customers are struggling or revenue is being pushed.
   6. And off the face of the statements: operating lease liabilities, pension deficits, guarantees and contingent liabilities in the notes. Those are real claims that do not sit in the debt line.

   Where candidates lose it

   Staying on the income statement. Credit is about cash and claims, so the answer lives on the cash flow statement and in the notes. Mentioning the notes, and specifically contingent liabilities, is what separates a credit answer from an equity answer.

   Expect next

   • How would you assess a good borrower qualitatively?
   • What would you ask the CFO if you were the lead analyst?
   • How do you determine whether a company is good for credit investing?

   Reported by candidates at RBC Capital Markets (Corporate Banking, New York, 2026); Wells Fargo Securities (Generalist, North Carolina, 2025). Source: Wall Street Oasis.

9. 067Walk me through the syndication process.Debt capital marketsIntermediatetechnicalScotiabankDebt Capital Markets · New York · 2026

   Say this

   The arranging bank commits to the borrower, then sells the loan down to other lenders. Underwrite and mandate, prepare the information memorandum and ratings, launch to a lender group, build the book, then allocate, close and fund.

   Then walk it

   1. Mandate and structure: the bank agrees the terms and either underwrites, meaning it guarantees the full amount and takes the risk of selling it, or arranges on a best-efforts basis.
   2. Preparation: build the information memorandum and the model, get ratings from the agencies if it is a rated deal, and agree the credit agreement terms with the borrower.
   3. Launch: a bank meeting or lender call presents the credit. Then a commitment period, usually one to two weeks, during which institutional investors submit orders at a price.
   4. Price discovery and flex: if the book is undersubscribed the arranger uses flex language to widen pricing or tighten terms. If it is oversubscribed they tighten. This is the part that makes underwriting risky.
   5. Allocation, documentation, closing and funding. Then the paper trades in the secondary market, which is where the loan's price is discovered from then on.
   6. The risk that matters commercially: in an underwritten deal, if the market gaps between commitment and syndication, the bank is left holding paper it has to sell at a loss. That is hung debt, and it is why underwriting fees exist.

   Where candidates lose it

   Describing it as a simple sequence and missing flex and underwriting risk. The commercial substance of syndication is who bears the market risk between commitment and sell-down. Name flex language and hung debt.

   Expect next

   • Tell me about the two different types of loans in the broadly syndicated loan market.
   • What is market flex?
   • What happens if the deal does not clear?

   Reported by candidates at Scotiabank (Debt Capital Markets, New York, 2026). Source: Wall Street Oasis.

10. 068Tell me about the two different types of loans in the broadly syndicated loan market.Debt capital marketsHardtechnicalScotiabankDebt Capital Markets · New York · 2026

    Say this

    Pro rata and institutional. Pro rata is the revolver and the amortising term loan A, held mostly by banks. Institutional is the term loan B, bullet maturity, sold to CLOs and credit funds.

    Then walk it

    1. The pro rata tranche is the revolving credit facility plus term loan A. Banks take both together, because the revolver is a relationship product that generates ancillary business and is often undrawn.
    2. Term loan A amortises over five to seven years and prices tighter, because banks accept lower spread for the relationship.
    3. The institutional tranche is term loan B: minimal amortisation, usually one percent a year, bullet at maturity in seven years, floating rate over a benchmark like SOFR with a floor.
    4. Term loan B buyers are CLOs, loan mutual funds and credit funds. They want yield and duration, not relationship, so they price purely on credit and market conditions.
    5. The reason the split exists: the two buyer bases want completely different things. Banks want short duration and ancillary revenue; institutional investors want long floating-rate paper they can lever inside a CLO. Structuring a deal means giving each what it wants.

    Where candidates lose it

    Confusing term loan A and term loan B, or not knowing who buys each. The buyer base is the actual content of this question. If you can name CLOs as the dominant term loan B buyer, you sound like you work in the market.

    Expect next

    • Who buys term loan B, and why does that matter for pricing?
    • What is a CLO?
    • What are the different types of accounts in a CLO new issue settlement?

    Reported by candidates at Scotiabank (Debt Capital Markets, 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.