Mastering the Investment Banking Technical Interview

February 20, 2024

Technical interviews in investment banking can be intimidating, but with the right preparation, you can excel. Here's a comprehensive guide on how to prepare:

1. Know Your Valuation Methods

Three key valuation methods you must master:

  • Discounted Cash Flow (DCF)
  • Comparable Company Analysis
  • Precedent Transactions

Each of these methods has its strengths and weaknesses. Be prepared to discuss when and why you would use each one.

2. Understand Financial Statements

You should be able to navigate and interpret the three main financial statements:

  1. Income Statement
  2. Balance Sheet
  3. Cash Flow Statement

Pro Tip: Practice explaining how changes in one statement affect the others. This demonstrates a deep understanding of financial interconnections.

3. Master Key Financial Ratios

Some crucial ratios to know include:

  • EV/EBITDA
  • P/E Ratio
  • Debt/Equity Ratio

For each ratio, be able to:

  • Calculate it
  • Interpret its meaning
  • Discuss its limitations

4. Practice Mental Math

Quick calculations are often required in interviews. Here are some tips:

  • Practice basic arithmetic daily
  • Learn shortcuts for common calculations
  • Stay calm under pressure – take a deep breath before answering

5. Stay Updated on Market Trends

Being knowledgeable about current events in finance is crucial. Make sure to:

  • Read financial news daily (WSJ, Financial Times, Bloomberg)
  • Follow key companies in your target industry
  • Understand recent mergers, acquisitions, and IPOs

Remember, preparation is key. The more you practice, the more confident you'll be in your interview. Good luck!