Investment Banking Interview Guide: What to Know in 2025

This investment banking interview guide is designed for candidates who want to stand out in investment banking interviews and secure offers at top firms. It explains the interview process, covers technical concepts, and provides tactics for behavioral questions. By reviewing these sections, applicants gain the technical knowledge and communication skills needed to handle questions and answers successfully.

What is Investment banking?

Investment banking continues to attract professionals with backgrounds in finance, accounting, economics, engineering, and other fields. The role involves advising companies on mergers, acquisitions, leveraged buyout transactions, debt capital markets deals, and initial public offerings, all of which are key functions of an investment bank. Employers look for candidates who grasp corporate finance, valuation, and the three financial statements. Candidates also need strong communication skills to interact with colleagues and clients in high-pressure settings.

Reading this investment banking interview guide helps applicants develop a competitive edge by learning how to handle investment banking interview questions, whether they are technical questions or behavioral prompts. The recruiting process rewards those who are prepared, confident, and well-informed about key technical topics like discounted cash flow analysis, net present value, enterprise value, equity value, and more.

What to Expect in the Interview Process

Steps in the Process

Most banks use multiple rounds to find the right fit. The first step involves an online application or referral. Candidates then meet recruiters for an initial discussion—often a short phone call or video interview—to gauge motivation and check basic qualities like clarity of speech. Those who pass this round move on to more thorough sessions that test technical knowledge on financial statements, capital expenditures, interest payments, net working capital, and other areas.

Banks often host a final round called a Superday, which features back-to-back discussions with associates, vice presidents, and managing directors. This day covers deeper technical concepts such as valuation and DCF analysis, leveraged finance principles, and capital structure decisions. Some firms include case studies or group exercises that simulate real-world transactions involving comparable companies. Many of these activities assess how candidates tackle detailed questions and answers under time pressure.

What Banks Are Looking For

Banks want to see a balance of analytical and interpersonal skills. On the analytical side, they want familiarity with corporate finance topics like interest expense, growth rate projections, and net present calculations. On the interpersonal side, they want strong teamwork, communication, and maturity. In many cases, recruiters also focus on cultural fit and how well a candidate might get along with the entire firm.

Candidates can improve their odds by studying technical knowledge, practicing sample answers, and showing genuine curiosity about private equity, capital markets, and equity research. Applicants who demonstrate knowledge of the interview process and who can speak thoughtfully about topics such as total assets, tax rates, and accounts receivable stand out. Understanding both broad trends and industry-specific multiples can help in discussions on debt capital markets or the role of a PE firm in mergers and acquisitions.

Getting Ready for the Technical Interview

Know the Financial Statements

A major part of any banking interview is the discussion of the three financial statements. Each of these statements serves a distinct purpose. The income statement shows revenue, expenses, and net income for a given period. The balance sheet shows a snapshot of a company’s assets, liabilities, and shareholders’ equity value at a specific point in time. The cash flow statement outlines the company’s cash flows, including operating, investing, and financing activities.

The Income Statement

• Tracks revenue, cost of goods sold, operating expenses, interest expense, taxes, and net income.
• In M&A models, income statements of both the Buyer and Seller are combined to reflect the financial performance of the merged entity, taking into account factors like foregone interest, debt interest, and synergy realizations.
• Banks may ask how interest payments flow through the income statement and how certain items like depreciation affect net income.

The Balance Sheet

• Shows total assets such as cash, inventory, and accounts receivable.
• Details liabilities and shareholders’ equity, including retained earnings and preferred stock.
• Important to understand a company’s capital structure and how it funds growth with debt or equity.

The Cash Flow Statement

• Reflects the inflows and outflows of cash in operating, investing, and financing activities.
• Ties net income from the income statement to changes in working capital and other items.
• Important for analyzing a company’s liquidity and how stable its cash flows are over time.

Each statement connects to the others. The ending cash balance on the cash flow statement shows up under current assets on the balance sheet. The net income from the income statement flows into retained earnings on the balance sheet. Understanding these links helps candidates master technical interview questions about how a company’s assets and liabilities shift when certain events occur.

Understand the Valuation Methods

Valuation is a cornerstone of most investment banking interview questions. Interviewers like to see if candidates can explain discounted cash flow analysis, multiples analysis, and other models clearly.

Discounted Cash Flow Analysis

This method projects a company’s cash flows over several years, and then discounts them at a weighted average cost. The final year involves a terminal value, which might be found using the Gordon growth or multiples methods. The present value of these cash flows represents the company’s PV (often called enterprise value when adjusted properly). Knowing how to handle net present value and the discount rate is key.

Comparable Companies

This approach involves looking at similar companies in the market to see how they are valued. It often includes metrics like EV/EBITDA, EV/Revenue, or price-to-earnings ratios. These industry-specific multiples help candidates estimate the worth of a target company with the same type of operations or growth rate.

Precedent Transactions

Also called “transaction comps,” this method looks at past deals involving comparable targets. It can reveal how much buyers paid for a control premium. It can also help highlight valuation ranges based on actual market transactions. Interviewers ask about how differences in market conditions might affect the final deal multiple.

Terms and Ideas

• Enterprise Value vs. Equity Value: Enterprise value reflects the worth of the entire firm, including debt minus total cash, while equity value is the share of value owned by common shareholders.
• Leveraged Buyout: A transaction where a buyer uses a significant amount of borrowed capital to buy a company’s assets and boost potential returns.
• Net Working Capital: Current assets (including accounts receivable) minus current liabilities. A change here can affect the cash flow statement.
• Multiples Method: A process that uses data from similar companies to estimate a target firm’s valuation.
• Terminal Value: The estimated value of a business after the forecast period ends. This might involve the Gordon growth method or an exit multiple.

Questions You Will Be Asked

• “How do the three financial statements link together?”
• “Explain enterprise value and equity value and how they differ.”
• “Discuss a discounted cash flow analysis for a company that has negative cash flows.”
• “Walk through a leveraged buyout scenario and how interest payments might affect net income.”
• “What causes changes in net working capital, and why does it matter?”

Providing sample answers that speak to the entire concept helps. For instance, when discussing net present value, try to show how a firm calculates present value for future cash flows and how an increase in the weighted average cost might lower the overall valuation.

Nailing the Behavioral Interview

Why These Questions Matter

Even if someone has a deep knowledge of technical concepts, a banking interview often checks personality and communication style. Since investment banking teams work under tight deadlines, the ability to communicate clearly and remain calm is seen as vital. Individuals should also show they can adapt to different professional backgrounds and maintain a positive attitude.

Common Questions and Answers

What is the difference between enterprise value and equity value?

• Answer: Enterprise value represents the total value of a company, including both equity and debt, minus cash. It is often used to measure a company's overall worth, especially in acquisition scenarios. Equity value, on the other hand, represents the value of a company available to common shareholders and is calculated by multiplying the share price by the number of shares outstanding.

How do the three financial statements connect?

• Answer: The income statement shows a company's revenues and expenses, leading to net income. This net income flows into the balance sheet under retained earnings. The balance sheet shows the company's assets, liabilities, and equity. The cash flow statement adjusts net income for non-cash items (like depreciation) and changes in working capital, providing the net cash flow that affects the company's cash balance, which is reflected on the balance sheet.

What is a leveraged buyout (LBO)?

• Answer: A leveraged buyout is a financial transaction where a company is purchased using a significant amount of borrowed funds. The target company's assets and cash flows are often used as collateral to secure the debt. The goal of an LBO is to generate high returns on equity by using debt to finance the majority of the purchase price.

How would you value a company with negative cash flows?

• Answer: Valuing a company with negative cash flows can be tricky, but it’s often done by adjusting the traditional discounted cash flow (DCF) method. One option is to focus on future projections where the company is expected to become profitable. You can also use other valuation methods like comparable companies or precedent transactions, which may provide a more realistic measure of value for distressed or early-stage companies.

Explain how capital expenditures affect the cash flow statement.

• Answer: Capital expenditures (CapEx) are the funds used by a company to acquire, upgrade, or maintain physical assets such as property, buildings, or equipment. On the cash flow statement, CapEx appears under investing activities. While it is a cash outflow, it is a long-term investment in the company's assets, so it doesn’t immediately affect the company's operating cash flow but impacts its overall cash position.

What are some common financial ratios used in investment banking?

• Answer: Some common financial ratios include:
  • Price-to-Earnings (P/E) Ratio: Measures the price of a company’s stock relative to its earnings per share.
  • Enterprise Value to EBITDA (EV/EBITDA): A valuation multiple used to compare a company's enterprise value to its earnings before interest, taxes, depreciation, and amortization.
  • Debt-to-Equity Ratio: Measures the financial leverage of a company by comparing its total debt to shareholders' equity.
  • Return on Equity (ROE): Shows how effectively a company uses shareholders' equity to generate profits.

What are some of the key challenges in investment banking?

• Answer: Investment banking is fast-paced and involves long hours. The pressure of working on high-stakes deals, managing multiple projects, and dealing with tight deadlines can be stressful. Additionally, staying updated with the market and economic trends is essential to making informed decisions and recommendations. Balancing client expectations with practical solutions and maintaining professionalism in stressful situations are key challenges for investment bankers.

Interviewers may ask about:

• Past teamwork examples, focusing on how you handled conflicts or disagreements.
• Motivation for pursuing investment banking is often tied to learning about capital markets or private equity.
• Strengths and weaknesses, seeking honest self-reflection.
• Time management and the ability to juggle multiple projects.

Many interviews also include situational questions that examine candidates' responses to workplace scenarios. These might be framed around a challenging group project, a leadership role in college, or an internship where they had direct responsibility for important tasks.

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How to Answer

Many people use the STAR method:

• Situation: Describe the context or project.
• Task: Explain what needs to be accomplished.
• Action: Outline the steps you took.
• Result: Show the outcome and what was learned.

When discussing strengths, it helps to give a real example rather than a generic statement. For example, mention a time you took the lead during a group project and delivered a strong result, linking it to investment banking skills like attention to detail or resilience.

Preparing Ahead of Time

Brush Up on Key Topics

Strong preparation for an investment banking interview guide involves building a solid base of technical and behavioral skills:

• Corporate Finance: Understand how interest payments, capital expenditures, tax rates, and changes in total assets affect cash flows.
• Financial Modeling: Practice simple or moderate models that involve forecasting the three financial statements, calculating net present value, and adjusting assumptions about the growth rate.
• Equity Research: Reading analyst reports can help you grasp how professionals evaluate a company’s PV, combined share count after a transaction, and other details.

Many people also practice mental math to handle quick calculations in front of interviewers. This might involve a quick multiples analysis or summing up total cash flows for a rough enterprise value estimate.

Stay Updated

Follow business news outlets that discuss relevant industry transactions. Investment banks appreciate candidates who track major deals, such as private equity buyouts or big acquisitions in debt capital markets. This awareness helps answer interview questions and get answers about industry trends. It also shows curiosity about finance as a whole.

Build Your Network

Networking is part of the recruiting process. Attending events, speaking with alumni who work in investment banking, or connecting with professionals on LinkedIn can lead to meaningful insights. These contacts can share inside details about what certain banks value most. Having a strong professional network may also improve your understanding of advanced or niche questions about capital structure or the roles of different groups within an entire firm.

Tips for Interview Day

Be Prepared

Review topics like:

• Discounted cash flow analysis and how terminal value is calculated.
• The difference between enterprise value and equity value and why it matters.
• The logic behind leveraged finance and how leveraged buyout deals might be structured.
• The basics of net present concepts and weighted average cost.

Arrive or log in on time, dress conservatively, and bring a few copies of your resume and notes. Showing organization demonstrates respect for the interview process.

Make a Good Impression

Communication is important in an investment banking interview guide because it reflects how you might interact with clients. Speak clearly and calmly and maintain professional body language. When questions come up about the industry or your career goals, answer concisely and connect them back to your interest in investment banking.

Follow Up

Send short, tailored thank-you emails that reference part of your conversation with each person you meet. This small gesture shows that you listened closely and remained interested in the role. It can also help you stay top of mind, especially if the firm is choosing among several strong candidates.

Work with Investment Banking Coaches

Get help from an experienced Investment Banking Coach to improve your technical skills, practice interview questions, and get tips for success. Our coaches will guide you through every step, from understanding key financial concepts to answering behavioral questions confidently.

Final Thoughts

This investment banking interview guide is meant to offer a thorough look at the interview process and the most common technical concepts. For those who want to go further, seeking one-on-one coaching can help build confidence and refine skills. The steps range from learning about three financial statements to practicing mock sessions with experts.

Learning the details behind financial statements, corporate finance, and valuation methods, plus honing communication, helps applicants answer both technical interview questions and behavioral prompts. Keeping track of trends in capital markets, private equity, and debt capital markets adds real-world context to your knowledge. For more support, connect with a coach on Leland to get tailored guidance, practice real-world sample answers, and see how your approach measures up.

Related Articles

Explore these helpful resources to enhance your investment banking interview preparation further:

• What is Investment Banking?
• An Expert’s Guide to Resumes: Five Tips to Make You Stand Out
• What do Investment Banks Actually Do?
• Top Ten Investment Banks in the World
• The Best MBA Programs for Investment Banking
• How to Answer the "Why Investment Banking?" Interview Question
• 20+ Best Questions to Ask at the End of an Interview
• How to Pass the Consulting Screening Interview
• The Best Finance Newsletters & Podcasts to Subscribe To
• How to Prepare for a Career in Investment Banking

FAQs

What is the hardest part of investment banking interviews?

• Many find that technical interview questions about discounted cash flow analysis, net present value, or total cash flow modeling pose the toughest challenge. Others might struggle with the behavioral portion, which can be just as important.

How can a candidate explain negative cash flows?

• They can mention high capital expenditures in the early stages or a period of slow sales growth. They may still calculate a valuation by estimating future improvements and using net present techniques, multiples analysis, or the Gordon growth method.

What should be worn during a banking interview?

• Most recommend a conservative suit in dark or neutral colors. Keep the outfit simple and neat.

How do I address a gap in my resume?

• Explain briefly and honestly. Focus on skills gained or personal development. Employers appreciate transparency, especially if you can link that period to new knowledge or preparation for an IB interview guide.