Wall Street Prep
The Wall Street Prep Interview Guide

100+ Technical Finance Interview Questions You Need to Know

Ahead of your interview, be sure you can handle these "most-asked" finance questions

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Before diving into the questions, there are few guidelines that should govern your general approach to answering technical interview questions:

Keep answers short

One of the most popular investment banking interview questions is “How do you value a company?” I could easily take an hour to explain how to value a company and I’d still not scratch the surface. That’s not what we’re going for in an interview. The interviewer just needs to understand that you can articulate valuation concepts at a high level. In most cases, questions should not go longer than 2-3 minutes. When you’re asked expansive technical questions where you aren’t sure about level of detail, it’s reasonable to finish a succinct answer with “would you like a little more detail on any of this?”

... But don’t make answers too short

While most candidates struggle with keeping answers short, a few have the opposite problem and don’t say enough. For example, answering another common question “Walk me through the cash flow statement” by saying “you start with net income, make non-cash adjustments to net income to arrive at cash for the year” isn’t enough. As a guide, questions without clear numerical or concrete answers, answers should be at least 1 minute. Show them how you’re thinking.

Don’t get into tangents you don’t fully understand

For example, if you’re asked to define cost of equity, you should only bring up that beta is a flawed measure of company risk if you’re dying for a follow-up question.

As a rule, the more knowledge a candidate represents in their resume and interview, the more likely the candidate will be challenged to “go deeper” by the interviewer. Don’t extend beyond your comfort zone when answering questions. Keep answers concise so that you don’t give the interviewer extra reasons to probe deeper.

Handling questions you don’t know the answer to

You will almost certainly be asked questions you don’t know the answer to. A big part of the technical interview is how you handle stress. Remember to be calm and humble and try not to let them see you sweat. The most important thing is that when things go wrong, don’t spiral: It’s often not as bad as you think. There are three approaches when dealing with questions you don’t know the answer to:

  • If you kind of know something related to what’s being asked
    If there’s a credible way to describe a part of the question that you do understand without making it sound like BS then state what you do know, but don’t guess!

    • For example, if you have no idea how to answer the question “how would you value a bank?” you might say “I know that banks are different from traditional companies in that their main source of revenue comes from interest on loans but I don’t think I really understand bank valuation that well and it is definitely something I’m going to look at after this interview.”
  • If you think you know the subject matter but don’t understand what’s being asked
    For example, if an interviewer asks you “is EBITDA usually lower or higher than cash flow?” you’ll want to reformulate the question back to the interviewer or ask for clarification i.e. “just to make sure I understand the question, are you defining cash flow here as unlevered free cash flows or as operating cash flows?”
  • If you just flat out don’t know the answer
    It is preferable to humbly say “Honestly, I would need to think about that some more and I’d rather not guess because I don’t think I’m going to be able to give a sufficient answer” than to guess. It is important to be humble in this situation: You don’t want to come off as indifferent to the fact that you don’t know the answer, but at the same time you also don’t want to spiral. A big part of damage control is making lemonade out of lemons and using the opportunity to show the interviewer your professionalism under stress – while not a technical skill, this is key interpersonal skill they’re looking for!

General market knowledge

Before diving into the technical questions, it’s generally a good idea to start reading the Wall Street Journal – both the front (homepage) and 'Markets' sections. In addition, if you happen to be preparing for an interview during a particularly important economic period or event (i.e. financial crisis, healthcare reform, tax reform, Fed changing interest rates) be aware of what’s going on in case you get asked.

There are a few metrics you should memorize because they come up a lot (All can be found on front cover of the Wall Street Journal):

  1. What did the Dow/NASDAQ/S&P 500 close at last night?
  2. What is the current 10-year risk free rate?
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Accounting Questions

Definitions
Financial statement linkages and accrual vs cash accounting
Financial statements
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Valuation Questions

General Valuation and Corporate Finance
DCF Valuation
Comps Analysis
Misc. Valuation
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Mergers & Acquisitions Questions

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Leveraged Buyouts Questions

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Fixed Income Questions

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Industry Specific Questions

Oil & Gas
Real Estate (REIT)
Bank (FIG)
Bankruptcy & Restructuring
Maritime & Shipping