Investment Banker Interview Questions

"There are plenty of ways to value a company, but the two primary methods are to look at the company's discounted cash flow variation and relative valuation. Analyzing the discounted cash flow of a company will give me an estimate of its current value based on the amount of money it will earn in the future. Relative variation compares one company's value to its competitor to assess its worth. Neither method is concrete as the company's value will vary as it grows."

"The three financial statements include a balance sheet, cash flow statement and income statement. A balance sheet shows the company's assets, liabilities and net worth. The cash flow statement shows cash from three activities: operations, investing and financing. An income statement shows how much the company earned over a period of time, such as quarterly or annually."

"The cost of equity tends to be higher than debt. This is because, in the case of liquidation or bankruptcy, debt is paid before equity. Interest rates for debt also tend to be lower, and it is tax-deductible, saving the company money on their income taxes."

"As debt tends to be cheaper than equity, I often recommend companies to use debt financing instead of equity financing. Issuing debt is less risky and is a cheaper method of financing. It also creates a tax shield, allowing the company to deduct the interest they pay from their taxes. Debt financing also gives your company more freedom. Lenders won't tell you what to do with the money or how to run your company. Equity financing requires you to have investors that will have a say in decisions your company makes."

"I was always interested in finance, which is why I pursued a major in the field, but I wasn't sure what I wanted to do with it. I interned at a bank while I was in university and met people in various roles. The few investment bankers I met introduced me to the role, and it immediately intrigued me as I love investing and learning more about the best techniques and methods."

"An investment banker helps organisations raise money through investments or by borrowing. Investment bankers may also research the market to advise companies about what the best financial decisions are. They may also manage a company's assets or assist a financial team with doing so."

"I believe one of the most important qualities an investment banker should have is strong communication skills. Being able to communicate with anyone easily helps me make lucrative deals that benefit my clients. I can also think analytically, which helps me make well-thought-out decisions and advise companies."

"My previous company was trying to land a client that could help us earn over a million dollars a year, so it was a big deal. I was the main point of contact with the client, so I did most of the negotiating. I spent months building a relationship with the client so they knew they could trust us. After a lot of back and forth, we landed the client."

"I have worked hard to become an investment banker and really enjoy the work, so I would like to stay in investment banking long term. I think working for a bigger company, such as yours, for a long time will help me learn even more about the industry and build a bigger client base."

"The weighted average cost of capital is a calculation you can use to determine an organisation's cost of capital for different sources, such as common or preferred shares and debt."

"Before advising anyone to invest in anything, I would thoroughly research it myself. While researching, I would compile convincing evidence towardss investing, such as an estimate of how much you could earn. I would deliver this information in a presentation and list the pros and potential cons of the investment to help you make an informed decision. If my research shows that the investment isn't worth it, I wouldn't try to convince you it was as I value honesty and integrity."

"Commercial banking is for customers to store and access their money, as well as receive loans or interest from their deposits. Investment banking does not deal with customers, but organisations and investors instead. Investment banks focus on selling investments and holding debt and equity from banks."

"I would recommend a company merge with another one if it's a good financial decision for both parties. For example, a smaller company merging with a larger one will benefit from their resources and client base, allowing them to expand. The larger company will benefit from the extra income."

"To get the cost of equity, you must divide the dividend per share by the market price per share, then add the growth rate of dividends. The number you get from this calculation will tell you the rate of return required for a potential investment or project."

"A lot of the challenges I faced in previous roles were ones out of my control, such as market fluctuation and cyber attacks, any reason for the stock market to drop. Trying to help the company come back from those losses was difficult, as many of my colleagues wanted to pull our investments right away. I suggested otherwise, so we kept most of our investments and waited for the stock market to stabilise again, allowing us to earn back our money."