BUSINESS

Interview Questions and Answers for An Investment Banking Job in 2021

The investment banking industry is growing rapidly post-pandemic. Being a financial service company engaged in advisory-based financial transactions, the industry today is looking for professionals who are resilient and can come up with new and innovative solutions for the prevailing problems due to the pandemic effect.

If you are one of the aspiring professionals seeking a career in the investment banking industry, the first step is to become eligible for it. Be prepared yourself by gaining the recent knowledge and skills that the industry seeks. Apart from your finance degree and experience, it is necessary to acquire new skills in strategy, technology front, interpersonal skills, evidence or confidence of work experience in challenging situations. Earning an investment banking certification would be the right bet for you.

Then comes the next part, your interview.

Here is a brief view of an investment banking interview and an introduction to common questions and answers that would be asked in an interview.

In brief, an interview lasts for about 45 minutes to an hour. The whole period gets divided into question themed on academic achievements, employment history, technical questions, problem-solving questions, and fit questions.

Here are a few of the technical questions that are commonly asked with their answers for your reference.

Investment banking interview: Technical questions and answers

Take a look at the most commonly asked technical questions in the interview.

Q1: Explain to us the main difference between cash-based and accrual accounting:

Answer: Cash-based accounting refers to the revenue and expenses as the cash is received or paid out. Whereas accrual accounting refers to revenue recognized when the collection is certain and expenses incurred instead of when they are paid out in cash.

Q2: Do you know that investment banking has another term? If yes, what is it?

Answer: Yes, investment banking is also called corporate finance.

Q3: Why do you want to join an investment banking industry?

Answer: Be direct in your answer. Let your answer reflect your interest, enthusiasm, knowledge, and skills for the industry. Be aware of the industry, the firm you are attending an interview with, differentiators of the form in the market, your skills, attributes for the job. Explain why you think that the job is suitable for you.

Q4: How do you calculate the working capital?

Answer: The formula to calculate working capital is:

Working capital=current assets-current liabilities.

Q5: Explain WACC.

WACC is an acronym for the Weighted Average Cost of Capital. It refers to the calculation of an organization’s capital that includes every source of capital. It also takes into account the factors such as debt, equity, depreciation, and tax rates.

Q6: What are your long-term career goals?

[The answer for this question helps the interviewer to know how determined you are to join the industry, how far you have visualized yourself in the career]

Be honest with your answer. Your depth in the investment banking domain helps you to answer this question. If you are really determined to join the industry, you would definitely know, where you stand now, where you visualize yourself in the coming 4-5 years.

The destination ahead helps you to tread the path, understand the steps in reaching the destination. The answer comes to you intuitively.

Q7: What is the difference between investment banking and commercial banking?

A commercial bank accepts deposits from customers and provides loans. The loans are held as assets on the bank’s balance sheet. On the other side, investment bank acts as an intermediary between investors and companies. It sells investments, holds loans or equity, and acts as an advisory for M&A deals.

Q8: What is the Beta value?

By default, the value of beta is 1.0. If it is lesser than 1, then the stock is considered less risky and vice-versa.

Q9: what is a good financial model?

The model is able to handle dynamic scenarios of built-in analysis and error checking. It should identify all the important drivers of a business.

Q10: Which statement you choose to evaluate the financial viability of a company?

The cash flow statement gives the true picture of cash generated by the business in actual terms.

Bonus question:

Let us know one example where you faced a challenging situation and how you handled it?

Today’s situation has forced the industry to look for candidates who can challenge the situation with bravery and come up with innovative solutions. you may or may not have faced an industry’s challenges. But have an attitude to face challenging situations. This would help you win an interview.

To summarize, these are some of the basic and important questions you may have to answer in an interview. Apart from this, be prepared with the investment banking terminologies, basic principles, working principles, and strategy.

All the best for your interview.

sharmaniti437

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