A career in investment banking is emerging as one of the most sought-after, with finance graduates increasingly opting for an MBA specialising in this field. As for every job role, candidates need to land an interview before securing the job.
An investment banking interview typically includes quantitative and qualitative questions covering the basics of accounting, valuation, and finance. It also tests your knowledge in mergers and acquisitions and LBO modelling, to name a few.
Investment banking as a career in finance in India is growing in demand amongst both recruiters and applicants. This guide will explore the sample questions and answers one can expect in an investment banking interview including tips on researching and preparing for the final stage.
Uncovering the potential of investment banking
Investment banking typically involves many services, including public offerings, mergers and acquisitions, private placements, underwriting, and trading under its subject. With the global investment banking industry hitting $166.62 billion in 2023, the market growth has confirmed the need for more investment bankers.
Further, investment bankers can assist companies with financial strategies while reviewing their capital raising and overall structure. Investment bankers also offer their services to investors by conducting research and analysis occasionally.
Overview of investment banking interview preparation
Preparation
Research the company for which the interview is scheduled: When going for an interview, it is ideal to know about the company's history, mission, and primary and secondary initiatives. Having the necessary knowledge about the business model and the competitive landscape would be an advantage.
- Prepare for case studies: Going through multiple case studies can form a basis for one's expertise in investment banking. An alternative option would be to opt for an investment banking course. For instance, if a candidate opts for JP Morgan, then he/she must know how the leading investment bank generated an 8% market share globally.
- Practice communication skills and network well: Prepare to effectively communicate the answers to the interviewer. Also, networking is paramount as it allows people to be known for their abilities and upscale. With a career in finance in India, it is ideal to network well to see the industry's reach.
Common interview questions
Questions can differ in multiple settings, including a personal round where the interviewee has to introduce himself/herself and defend his/her choice of this job role. The later part would be solely technical, with live simulations of projects given to understand the candidate's ability better.
Listed below are the most common questions asked in an investment banking interview.
- What effect will the sale of a factory for $80 assume on the company's balance sheet, cash flow statement, and income statement, considering the presence of a 40% tax rate?
Balance sheet:
The factory sale will increase the company's cash account by the net proceeds of $48 (80 x (1-0.4)). This amount will be offset due by the company's decrease in the fixed asset account.
Income statement:
The factory sale will result in a one-time gain of $32 (80 x 0.4), reported as income on the company's income statement.
Cash flow statement:
The factory sale will increase cash by $48 (80 x (1-0.4)), reflecting the company's cash flow statement. It will be reported as an inflow from the sale of the factory. The cash outflow of $32 (80 x 0.4) will be put towards tax payment.
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What might immediately affect a company's present value (PV)?
External factors like economic changes, interest rates, and market conditions, both short- and long-term, can affect PV. Internally, factors such as the company's financial performance, including sales, cash flow, and profitability, can affect the cash flow by increasing or decreasing it. Changes in the debt or equity structure can also equally affect PV.
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How is DCF analysis valuable to the company?
Discounted Cash Flow analysis aids companies in evaluating their current and potential investments wilfully. It helps companies accurately measure the possible return on investments, paving a path for determining the most valuable option.
Other plausible questions may include the following:
- Define goodwill in finance.
- What is the need for a deferred tax rate?
- Take me through the components of a cash flow statement.
- How can a buyout model be leveraged for the company?
Conclusion
Investment banking is perfect for individuals looking for a challenging career in finance. It requires a careful combination of problem-solving abilities and an analytical understanding of the financial market and instruments involved.
The Certified Investment Banking Operations Professional (CIBOP) certification from Imarticus offers a comprehensive understanding of the investment banking industry. The investment banker course covers industry-specific topics like risk management, derivatives market, trade life cycle, etc. Bag jobs at globally acclaimed companies with Imarticus’ investment banking certification today!
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