Private Equity interview preparation

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September 2026

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1. 043How does depreciation flow through the three statements?AccountingCorefirst roundOaktree Capital ManagementDebt Capital Markets · New York · 2026Moody'sGeneralist · New York · 2022

   Say this

   Take $10 at a 25 percent tax rate. Pre-tax income falls $10, net income falls $7.50, but cash rises $2.50 because depreciation is non-cash and the only real effect is the tax saved.

   Then walk it

   1. Income statement: $10 of depreciation reduces EBIT by $10, so net income is down $7.50 after tax.
   2. Cash flow statement: start at minus $7.50, add back the $10 non-cash charge, so cash from operations rises $2.50.
   3. Balance sheet: cash up $2.50, net PP&E down $10, total assets down $7.50. Retained earnings down $7.50. It balances.
   4. The economic point is the depreciation tax shield: a non-cash charge that generates real cash by reducing tax.
   5. For a sponsor this matters at entry, because purchase accounting writes assets up, which creates additional depreciation and amortisation and therefore an additional tax shield. That step-up is worth real money and gets negotiated.
   6. And for a credit analyst the point is the opposite direction: depreciation approximates the capital the business must eventually respend, so EBITDA overstates the cash available to service debt by roughly the maintenance CapEx.

   Where candidates lose it

   Saying cash falls. It does not. And for a private equity or credit interview specifically, the expected addition is the link to the purchase accounting step-up or to maintenance CapEx. The bare mechanics alone read as a banking answer.

   Expect next

   • Now do $10 of CapEx.
   • How does the step-up in an asset deal change this?
   • Why is EBITDA a poor proxy for cash available to service debt?

   Reported by candidates at Oaktree Capital Management (Debt Capital Markets, New York, 2026); Moody's (Generalist, New York, 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.