Investment Banking Interview Preparation: The Technical Hill

Question Distribution by Category

Accounting

Accounting is transaction language. Every model runs on it. Know each statement's line items, their connections, and how changes propagate.

Core clusters: 3-Statement Basics, Working Capital Analysis

Representative questions:

• Walk me through how $10 of depreciation flows through the three statements.
• What does negative working capital mean?
• How would you forecast working capital line items?

Clear mechanical understanding eliminates abstraction from valuation, M&A, and LBOs.

Valuation

Valuation converts accounting into judgment—from "what happened" to "what it's worth." Start with comparables and DCFs. Focus on understanding value sensitivity to discount rates, growth, and margins.

Core clusters: EBITDA and Valuation Multiples, DCF Terminal Value, Cost of Equity

Representative questions:

• Why do we use EBITDA as a proxy for free cash flow?
• How do you calculate the cost of equity?
• When should you use perpetuity method vs. exit multiple for terminal value?

Interpreting valuation outputs—multiples, implied share prices, enterprise vs. equity value—enables dynamic application in M&A and LBO contexts.

M&A

M&A applies valuation dynamically. Understand why acquisitions happen, pricing mechanics, and financial impact on both parties. Master accretion/dilution math, purchase accounting, and strategic rationale.

Core clusters: M&A Strategic Rationale, M&A Purchase Accounting

Representative questions:

• Why would a company buy another?
• How do deferred tax liabilities get created in M&A deals?
• What are NOLs and why are they valuable?

Link qualitative factors (synergies, fit, motivation) to quantitative outputs (EPS impact, goodwill, balance-sheet adjustments).

LBOs

LBOs stress-test valuation logic by adding capital structure constraints. Understand cash generation, leverage mechanics, and return drivers. Memorizing Excel formulas is unnecessary; grasping debt's risk/reward amplification is required.

Core clusters: LBO Fundamentals, LBO Model Mechanics

Representative questions:

• How does leverage amplify equity returns?
• What are the key drivers of IRR in an LBO?
• Walk me through a simple LBO model.

With accounting and valuation mastery, LBOs become natural—the same engine operating under constraints.

Capital Markets

Markets determine what valuations realize. Understand how companies raise and deploy capital: buybacks, dividends, IPOs, bond offerings—and how macro conditions shift those decisions.

Core clusters: Capital Allocation and Payout Policy, Client Advisory and Idea Generation

Representative questions:

• What can a company do with excess cash?
• When would a company repurchase shares versus issue dividends?
• If your client wanted to IPO, what advice would you give them?

Market understanding adds realism—connecting valuation to timing, liquidity, and investor psychology.

Industry Application

With technicals internalized, demonstrate market literacy by interpreting trends and deals. Connect data to narratives.

Core clusters: Industry Trends and Outlook, Recent Deal Analysis

Representative questions:

• What are the trends in your target industry?
• Tell me about a deal you've been following.
• Would you have done the deal at that price?

Discussing an industry intelligently while connecting it to valuation logic signals client-facing credibility.

Top Clusters by Volume (Indexed: 100 = Valuation Multiples)