Investment Banking Technical Interview Questions & Answers

The technical interview is one part of the investment banking application process. Bankers are required to have quantitative skills, as their main role involves helping their clients raise money, and this interview is a test of those skills. Most of the questions will revolve around valuation and accounting. The firms want to see if you are able to think quickly on the spot, analyze problems effectively, and understand basic financial concepts.

Important Tips Before Your IB Interview

Build real relationships, not just “network”

Most top investment banking firms prioritize strong referrals, especially at the analyst and associate level. Cold applications rarely lead to interviews, but a thoughtful message to a current investment banker (ideally an alum or mutual connection) can open the door. Ask about their recent deals, how their team handles capital markets work, or how they built their financial modeling skills on the job.

Pro Tip: Mention a specific initial public offering or M&A transaction the firm was involved in—this shows genuine interest and a working understanding of their corporate finance focus.

Know exactly why you’re doing this

Generic answers like “I like finance” won’t cut it. When someone asks “Why investment banking?”, speak clearly about what drives you—whether it’s the fast-paced nature of capital asset pricing model decisions, the strategic aspect of comparable companies analysis, or the challenge of valuing private companies with limited data.

Tailor your answer to the firm. Are you interested in a group that focuses on enterprise value creation in tech M&A, or one that leads precedent transaction analysis in healthcare? The more specific your answer, the more credible you’ll sound.

Pro Tip: Use the “past, present, future” method: how your background led you here, what you’ve done to prep (like a top investment banking course), and where you want to go.

Prioritize quality over quantity on your resume

One strong internship where you built a discounted cash flow analysis, forecasted future cash flows, or adjusted a client’s net working capital is more impressive than several filler roles. Interviewers want to see that you’ve applied core technical concepts—like estimating the cost of equity, breaking down a company’s debt, or projecting free cash flow.

Be ready to speak fluently about interest payments, operating expenses, or why your model used present values instead of simple growth multiples. That depth is what sets candidates apart.

Pro Tip: For each experience, ask: Did I help value a company? Did I interpret financial statements? Did I get exposure to shareholders' equity, net income, or the company’s assets?

Show you're a strong teammate, not just a technical machine

Yes, you need to know the three financial statements cold. But banks hire people, not robots. At the end of the day, they want someone who can communicate clearly under pressure, contribute to a team, and not panic when a model breaks at 2 am. This is why culture fit and presence matter.

Don’t underestimate the importance of confidence, humility, and warmth. If your tone is too rehearsed or flat, you might not pass the “airport test.” Smile, engage, and speak like a future investment banking professional who belongs in the room.

Pro Tip: Practice walking through your resume and a sample deal out loud. Highlight the company’s capital structure, how you estimated equity value, and where you analyzed the cash flow statement or debt component.

Read more about acing the IB interview at A Guide to the Investment Banking Interview: Tips from an Expert.

Want a former banker to walk you through your story and drill you on technicals like net debt, interest expense, or terminal value? Book a mock interview with a top investment banking coach who’s worked at Goldman, Moelis, or Evercore. It’s the fastest way to get real feedback and improve.

20 Common Investment Banking Technical Interview Questions (and Sample Framing)

Here are the most frequently asked investment banking interview questions, with tips to structure your answers. Practice is key, especially aloud.

1. What is the appropriate discount rate to use in an unlevered discounted cash flow analysis?

Use the weighted average cost of capital (WACC) as the discount rate when valuing unlevered free cash flow. WACC represents the blended cost of the company’s debt and equity investors, adjusted for tax benefits since interest is tax-deductible.

2. How do you value a company?

Main methods include:

• Comparable companies analysis
• Precedent transaction analysis
• Discounted cash flow analysis
• Leveraged buyout analysis

Each triangulates the market value using different lenses—market comps, past M&A, intrinsic value via future cash flows, and financing-driven scenarios.

3. How would you value a company with negative historical cash flows?

Use metrics like revenue multiples or market capitalization. You can also look at comparable public companies with similar growth potential or focus on qualitative drivers like IP, user base, or market share.

4. How do you calculate WACC?

WACC = (% equity × cost of equity) + (% debt × cost of debt × (1 - tax rate))

You’ll need to use the capital asset pricing model (CAPM) to derive the cost of equity and estimate interest expense for debt. Don’t forget to subtract the tax shield.

5. When would you use EBITDA vs. revenue multiples?

Use EBITDA multiples when comparing companies with similar margins and capital structures. Revenue multiples are better for early-stage or unprofitable companies where EBITDA isn't meaningful.

6. What is beta, and how do you calculate it?

Beta measures a company’s volatility relative to the market. Use regression analysis or average the unlevered betas of comparable companies, then re-leverage them based on the company’s capital structure.

7. What is typically higher: the cost of equity or debt?

The cost of equity is higher because it carries more risk. Debt has priority in liquidation and is partially tax-deductible, while equity holders bear residual risk.

8. How do you calculate the cost of equity?

Via CAPM:

• Cost of Equity = Risk-Free Rate + Beta × Equity Risk Premium
• Use 10-year Treasury yields for the risk-free rate and adjust beta based on capital structure.

9. What is a leveraged buyout, and how does it work?

An LBO is when a buyer (typically a PE firm) acquires a company primarily using debt. The target’s future cash flows are used to pay down the interest payments and principal over time. The goal is to boost returns via leverage and operational improvement.

10. What’s the appropriate numerator for a revenue multiple?

Use enterprise value, not equity value, since revenue is generated by both debt and equity financing.

11. Two companies have identical metrics. One trades at 7x P/E, the other at 12x. Which would you choose?

Depends on context. A lower P/E may suggest undervaluation or risk. Consider free cash flow, growth potential, and the company’s enterprise risks before deciding.

12. How do you calculate unlevered free cash flows?

Start with EBIT, subtract taxes, add D&A, subtract capital expenditures, and net working capital. This gives you cash flows available to all capital providers.

13. When should a company issue debt vs. equity?

Debt is preferable when interest rates are low and the firm has stable cash flows. It’s also tax-deductible. Equity is better if the stock is overvalued or the company wants to preserve flexibility.

14. What are the three financial statements, and why are they important?

• Income statement: Shows net income, performance over a period
• Balance sheet: Snapshot of the company's assets, liabilities, and shareholders' equity
• Cash flow statement: Tracks how net income turns into cash balance

They’re interconnected—changes in one affect the others.

15. How are the income statement and balance sheet connected?

Net income flows into retained earnings on the balance sheet, while changes in interest, taxes, and depreciation affect liabilities and assets.

16. How would you value a company in an unfamiliar industry?

Rely on first principles: break down value drivers (growth, margins, reinvestment), use comparable companies, and normalize industry-specific metrics to translate to broader financial performance.

17. What are some recent market trends?

Stay up-to-date on capital markets, IPO windows, sector M&A, and rate environments. Be able to tie trends to specific deals, even if mock—e.g., “If Company B IPO’d now, would it trade above book value?”

18. If depreciation increases by $200, how do all statements change?

• Income statement: Net income drops
• Cash flow statement: Add back depreciation, net effect = +$200
• Balance sheet: PP&E drops, cash reserves rise, shareholders' equity falls via retained earnings

19. What does a negative enterprise value imply?

It usually means the company has more cash balance than debt, often due to deferred revenue or mispricing. It can be a red flag—or a value play.

20. What is an accretion/dilution analysis?

Used to assess if an M&A deal will increase or decrease earnings per share. Consider interest expense, synergies, preferred stock, and deal structure.

Behavioral Questions You Should Also Nail

In addition to these technical questions, there are three behavioral questions that you should also be able to answer well.

Why investment banking?

• Tie in your background, motivations, and exposure to deals or financial modeling.

Why this firm?

• Mention unique culture, deal flow, or mentorship opportunities.

Read: How to Nail the Second Most Common Investment Banking Interview Question

Walk me through your resume.

• Use a story arc. Highlight relevant experiences that show growth and financial analysis skills.

Top 10 Free Investment Banking Resources

• Resume - Zety IB Resume Guide
• Questions - Wall Street Prep Top IB Questions
• Accounting - CFI Accounting Course
• Excel - CFI Excel Fundamentals
• Market - EDX Fixed Income Course
• Pitchbooks - Udemy IB Pitchbook Course
• Stock Market - Udemy Investing Basics
• Templates - Macabacus Financial Model Template
• Videos - Skillshare IB Classes
• Library - Wall Street Mojo IB Resources

Where Can I Start?

Applying for investment banking interviews can be daunting, but have no fear because Leland is here! Read these articles for more free tips and tricks as you navigate the IB interview process.

• An Expert’s Guide to Resumes: Five Tips to Make You Stand Out
• How to Answer “Why This Firm?” and “Why Investment Banking?” in Interviews
• How to Break Into Investment Banking–What to Do From Freshman to Senior Year
• The Best MBA Programs for Investment Banking
• How to Answer “Why This Firm?” and “Why Investment Banking?” in Interviews
• Investment Banking Technical Interview Questions & Answers

Final Note

Leland provides you with the content, community, and coaching that you need to build your dream investment banking career and accomplish other ambitious goals. Sign up today to gain access to additional free resources, community events, small group classes, world-class coaching, and more.

Coach Recommendations

Here are several of our expert investment banking coaches who can help with any part of the application, recruiting, and hiring processes. See our full list of world-class IB coaches here.

FAQs

What are the most common technical questions in investment banking interviews?

• The most common technical IB questions fall into four buckets: accounting (e.g., “How do the three financial statements connect?”), valuation (e.g, “Walk me through a DCF”), M&A (e.g., “Is this deal accretive or dilutive?”), and LBOs (e.g, “What drives IRR?”). Interviewers often test both conceptual understanding and the ability to do quick math or mental modeling. Practice explaining frameworks out loud and walking through numbers clearly.

How do I explain a DCF in simple terms for an interview?

• Start by saying that a DCF values a company based on how much cash it will generate in the future. You project the company’s unlevered free cash flow for 5–10 years, then estimate its terminal value. You discount both back to the present using the WACC to get the enterprise value. It’s all about estimating future performance and the risk-adjusted return you'd want for investing in the company today.

What accounting concepts should I know for IB interviews?

• Focus on the “big three”: the income statement, balance sheet, and cash flow statement, and how they link together. Key concepts include: how depreciation, amortization, and changes in working capital affect cash flow; what happens when you expense vs capitalize something; and how deferred taxes and goodwill work. You don’t need to be an accountant, but you should understand the flow of money and logic behind the statements.

How do I walk through the three financial statements?

• Start with the income statement: it shows revenue, expenses, and net income. Net income flows to the top of the cash flow statement, where non-cash items like depreciation and changes in working capital are adjusted to get to cash from operations. Then, add cash flows from investing and financing to get the net change in cash. The balance sheet updates with new cash, retained earnings, and any changes to debt, assets, or equity.

Can you quiz me on investment banking technicals like an interviewer would?

• Walk me through a DCF.
• What are the two main valuation methodologies, and when would you use each?
• A company has negative EBITDA—what does that mean?
• If depreciation goes up by $10, how does that affect the three statements?
• How do you calculate WACC, and why is it used in valuation? Try answering these out loud—interviewers want to hear how clearly and confidently you explain the concepts.