Have you ever wondered why there are so many positions in the field of investment banking that pay enormous salaries? According to the IMF, 45% of the vacancies are still vacant due to the lack of the skills that are required to clear the job interview to become an Investment banker. For this reason, we have prepared a list of top Investment Banking interview questions that will help you in acing your job interview. All the questions mentioned below have previously been asked in interview rounds by top Investment Banks. Going through all of them will provide you with enough confidence and an idea about what to expect in an interview.

Top Investment Banking Interview Questions and Answers

Investment Banking is a highly competitive and rewarding field in the world of finance. The selection criteria followed by some top Investment Banks like Godman Sachs and Morgan Stanley can be very challenging. There are many rounds involved when you apply for a position of an Investment Banker and the interview round is one of the most crucial. Keeping this in mind, we have prepared the list of the top 35 most asked interview questions along with their answers.

The questions will be further categorized into three different categories:

• Basic Investment Banking Interview Questions
• Intermediate Investment Banking Interview Questions
• Advanced Investment Banking Interview Questions

Basic Investment Banking Interview Questions

1. Who is an Investment Banker?

An Investment Banker is responsible for helping businesses and governments raise capital and providing assistance when a company wants to merge or acquire another company.

An investment banker is involved in various financial activities like arranging finances, underwriting deals for clients, equity financing, negotiating with acquisitions and mergers, etc.

2. What are the three financial statements?

• Income Statement – The income statement is a financial statement that shows the company’s profitability. It starts with the revenue line and works its way down to net income after deducting various expenses. The income statement is for a specific time period, such as a quarter or year.
• Balance Sheet – The balance sheet does not cover the full period, but rather provides a snapshot of the company at a given point in time, such as the end of the quarter or year. The number of assets and liabilities must always match the sum of equity and liabilities.
• Cash Flow Statement – The statement of cash flows is a magnified version of the cash account on the balance sheet that accounts for the entire period, reconciling the cash balance at the beginning and end of the period.

It is usually calculated by taking net income and adjusting it for different non-expenses and non-cash revenue to get at cash from operations. The cash from investment and financing is then added to the cash flow from operations to calculate the net cash change for the year.

3. How can a company be valued?

There are two different ways of valuing a company, namely the Intrinsic Value (discounted cash flow valuation) and the Relative Valuation method.

• Intrinsic Value (DCF): Without making comparisons to any other firms, intrinsic valuations look at a company’s value based on its estimated cash flows.