In many finance interviews, especially IB and PE, behavioral interviews are followed by technical interviews. These interviews provide additional opportunities to demonstrate your relevant skills and fit for the position. They require significant preparation so talk to your career coach about building a plan that works for you and will have you ready by the time your industry-specific interview skills are put to the test.
What is it?
A type of interview where a candidate is given industry-specific analytical questions to assess the candidate’s understanding and fluency with relevant accounting and financial concepts. Technical interviews are often seen as a “check the box” interview to make sure the candidate is qualified. They are regarded as a threshold to demonstrate commitment and interest to the role, rather than seen as a differentiator. They require significant preparation.
What types of companies use it as a part of the recruiting process?
Technical interview questions are a standard part of the recruiting process at investment banks. Typically, analysts ask the more foundational questions and the more senior bankers probe deeper. Generally, interviewers will stretch the candidate in a supportive way, if they are impressed with the candidate’s responses to the more standard questions. Although this can feel alarming for the candidate, it is actually a good sign that the interviewer sees potential in the candidate. Generally, interviews for investment banking, sales and trading, equity research, private equity, asset and wealth management, and capital markets include technical questions as part of the process.
What are the general types of questions in technical interviews?
Technical interview questions generally fall into a few buckets: Accounting, Corporate Finance, Valuation (Equity Value and Enterprise Value, Valuation Metrics and Multiples), Modeling (Discounted Cash Flow (DCF) Analysis, M&A and Merger Models, and Leveraged Buyout (LBO) Models), and Brain Teasers.
General outline for a finance technical interview
- Accounting concepts: be prepared to walk through the financial statements and how they’re connected
- Examples questions
- What does the change in Working Capital mean, intuitively?
- How is Shareholders’ Equity or PP&E projected?
- Why is EBITDA often used in finance?
- Examples questions
- Corporate Finance: know the time value of money, discount rate, present value, and internal rate of return (IRR)
- Example question
- How much would you pay for a company that generates $100 of cash flow every single year into eternity?
- Example question
- Valuation
- Be fluent in Equity Value, Enterprise Value, and the different multiples and methodologies for valuation
- Examples:
- What are the advantages and disadvantages of EV/EBITDA vs. EV/EBIT vs P/E as valuation multiples?
- Walk from Equity to Enterprise Value
- Modeling
- Know DCF, LBO, M&A, and Merger models
- Examples
- Walk me through an Unlevered DCF
- Walk me through a leveraged buyout model
- What makes a good LBO candidate?
- Brain teasers: be prepared for questions that are unrelated to the job and might require extreme estimations
- Example: how many users take the Metro-North daily?