Investment Banking
6 three financial statements questions of the kind asked in investment banking interviews. Each carries a model answer, the concepts a complete response must hit, and graded feedback on your own attempt.
A standard three-statement variation once you've handled depreciation.
A company repurchases $100 of its own stock using cash on hand. Walk me through the three statements. Then tell me what changes if it funds the buyback with debt at a 5% interest rate.
A quick warm-up before harder statement questions.
Walk me through the three statements when a company raises $100 of debt at 6%. Then do the same for $100 of equity. Assume a 25% tax rate and that the cash is held, not spent.
The single most commonly asked question in investment banking analyst interviews.
Explain how the income statement, balance sheet and cash flow statement connect. Assume the interviewer wants the full linkage, not just a description of each statement in isolation.
The standard follow-up to the three-statement walkthrough. Assume a 25% tax rate.
Depreciation increases by $10. Walk me through what happens on all three statements. Use a 25% tax rate and assume nothing else changes.
Tests whether you understand that balance sheet movements alone don't touch the income statement.
A company buys $10 of additional inventory, funded entirely with debt. Walk me through the three statements immediately after the purchase, and then tell me what happens when the inventory is eventually sold.
Tests whether you can handle a non-cash charge that isn't depreciation.
A company writes down $100 of obsolete inventory. Walk me through the three statements at a 25% tax rate.
Write your answer, get it graded on technical accuracy, completeness and communication, and see exactly which mechanic you missed.
Firm names indicate where a question type is commonly reported in interviews. They are not sourced from, endorsed by, or affiliated with the firms named.