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INVESTMENT BANKING INTERVIEW
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34 INVESTMENT BANKING INTERVIEW QUESTIONS & ANSWERS Get more guides, books and training courses at the website www.How2Become.com. Copyright © PassMyInterview.com. All Rights Reserved. For personal use only. Welcome to your guide...
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Q1. Tell me about yourself. Sample Answer: I have held a passion for investment banking for many years now, and it is a role that I take seriously in respect of my responsibilities and my desire to achieve consistently outstanding results for my employer. I have built up a diverse set of skills and qualities that will enable me to quickly make a positive impact within your organization. I have strong analytical thinking skills; I am a solid communicator and relationship builder; I am innovative in my approach to investment banking, and I have a solid set of technical skills. Investment banking is highly challenging, but this is one of things that I find most attractive about the role. I will be fully committed to your organization and I will use my experience and expertise to help your clients achieve their financial objectives. I will be one hundred percent dedicated to being a high performing investment banker and I will work all the hours needed to ensure I help your organization continue to achieve the levels of success it deserves. Q2. Why do you want to work in investment banking? Sample Answer: Whilst the rewards of investment banking are appealing, the things that I am most attracted to include the fact I will be pushed and challenged in the role, I will need to work under pressure, and I will need to utilize a wide range of skills and qualities to achieve my goals. I love investment banking because, in order to be successful, you have to meet with clients, you have to assess financial accounts, you must run financial projections, create pitchbooks and prepare offers. All of these responsibilities require different skills, which means I will need to be at the peak of my performance one hundred percent of the time to achieve my objectives. In my opinion, no other job or role compares to investment banking in terms of the challenge, the commitment needed and the feeling you get when you achieve your financial and commercial objectives. Q3. Why do you want to work for our organization as an Investment Banker? Sample Answer: I want to work for your organization as an Investment Banker for three reasons. The first reason is, because of your track record of success and your passion for continual improvement and development, this is a place I will not only be pushed and challenged, but I will be supported to be the best I can possibly be. The second reason is, you have a set of impressive and inspirational business principles. It is clear you want to make a positive difference as an investment bank, not just in respect of your client’s goals and objectives, but also from a community and international perspective, too. Finally, I want to work for your organization because you have a reputation for being outstanding in everything you do. My Order ID: 0081249
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personal and professional values, I believe, are similar to yours as an organization which means I will be able to quickly have a positive impact in my role. Q4. What are the most important skills and qualities needed to be an Investment Banker? Sample Answer: There are numerous important skills and qualities needed to be a competent Investment Banker. These include, in-depth numerical and analytical thinking skills. It is important to be able to analyse data and company documents concisely and to then use the information to make effective decisions. You need outstanding communication skills and have the resilience, the energy and the determination to continually succeed. You must have expert knowledge of your sector and have the desire to keep up to date with industry developments, opportunities and trends. Other skills and qualities include leadership capabilities – you must be prepared to step up, take control and achieve your objectives under strict timelines. You must be competent with numbers and be an astute technical worker. You need to have an international outlook and be commercially aware. Afterall, the organization you are working for will only achieve success if you consistently meet your objectives as an Investment Banker. Q5. What will be the biggest challenges to our organization over the next few years? Sample Answer: I feel the challenges will be many and varied. There will likely be higher capital charges and, a
s the world moves more towards a digital economy, we will need make sure we are in a position to take advantage of the opportunities this will inevitably present. There will also be the challenges of utilizing blockchain technology and Artificial Intelligence within business – again, these challenges will present opportunities. We would also need to make sure we can attract the right talent to maintain the position the business is currently in today, and we will need to respond to the likely increased complexity of regulation and reporting. Finally, we would need to make sure we are in a position to deal with unexpected situations similar to the Coronavirus pandemic that has had a significant impact on the world and businesses in general. Q6. What are the different financial statements of a company? Sample Answer: There are four different statements that determine the financial position of a company. The balance sheet, the income statement, the cash flow statement and the statement of shareholder’s equity. A balance sheet determines what the company owns, and also what it owes at any one given date in time. Order ID: 0081249
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The cash flow statement will determine the company’s flow of money with external companies, individuals, contractors and suppliers, etc, over a given period of time. Finally, the statement of shareholders equity will determine the shareholders’ interests in the company over a set period of time. Q7. How would you value a company? Sample Answer: I would use a variety of different factors. I would assess and value the company assets. I would determine the price to earnings ratio, or simply use a multiple of profits based on an industry or sector rule of thumb. I would calculate the entry costs for starting up a similar business and I would also utilize industry comparables in respect of companies that have sold historically from that sector. Of course, I would need to assess all current and historical company accounting documentation to assess the health of the company at the point of assessment, and also where the company is likely to be positioned within its industry in the future. Q8. Would you be willing to break or bend the rules to achieve a positive outcome as an Investment Banker? Sample Answer: As a matter of course, no, I would never bend or break the rules as an Investment Banker, because to do so, would put your organization in jeopardy. Whilst there would be times when I will take a calculated risk from a financial investment perspective, I would never put the organization in danger, and I would never go against the rules from a regulatory perspective. Q9. If you had to choose one financial measure to assess the health of company, which one would it be and why?
Sample Answer: I would say, without doubt, I would choose the current and historical NET CASH FLOW of a business when assessing its financial health and status. Net cash flow is essentially the amount of cash and cash-
equivalents that come into a business, and also out of it. The main reason why I would choose NET CASH FLOW as a reliable financial measure, is because it is one of the prominent areas that investors and shareholders would use when assessing a company’s ability to generate value. So, essentially, a healthy NET CASH FLOW demonstrates a business is being run successfully and responsibly. Q10. What is EBITDA?
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Sample Answer: EBITDA stands for Earnings Before Interest, Taxes, Depreciation and Amortization. It is basically used by investors and financial analysts as a measure of company profitability. EBITDA, in a nutshell, is the operating revenues minus the operating expenses. It’s particularly useful for comparing one company against another for example, but it is only useful if the companies you are comparing are in the same line of business. Q11. What makes us different from our competitors? Sample Answer: You are different because you put the needs of your clients, stakeholders and shareholders first whilst helping local communities to thrive. You are totally committed to utilizing a wide range of resources to help your clients and communities grow. There is a genuine passion across the organization to not only set and maintain high standards, but to help the next generation continually grow and develop. You don’t just advise clients, stakeholders and shareholders, but you also help them finance projects; you help them transact so economies can grow; you provide support for markets; you effectively and responsibly manage assets; and you invest capital alongside your clients whilst at the same time innovating and thinking forwardly to ensure your strategic aims are constantly met. Q12. What discount rate should be used in an unlevered DCF analysis? Sample Answer: Because the free cash flows that occur in an unlevered DCF analysis are pre-debt, (meaning the business has no debt), there will be no interest to pay, and as such, no tax benefit from the interest that would have otherwise been there. Therefore, the cost of the free cash flows will apply to both the lenders and the providers of the capital. On that basis, the discount rate is the weighted average cost of capital to all providers of the capital. Q13. What is your approach to dealing with challenging situations? Sample Answer: I deal with difficult situations by remaining calm, by putting the interests of the organization I am employed by first, and by taking decisive action in a responsible and results-driven manner. For example, in my last role, I was working on a project with a small team of people trying to raise finance for a client. This was a difficult situation because the client had no previous history of trading, but their future plans were impressive. To deal with the problem, we held a team briefing, we discussed collaboratively the Order ID: 0081249
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different finance options available to us for meeting the client’s needs and we then put a plan of action in place to successfully achieve our objectives. By utilizing a clear and concise action plan, we overcame the challenge successfully and managed to raise the finance needed for the client. Q14. Which is usually higher - the cost of debt or the cost of equity? Sample Answer: Under normal circumstances, the cost of equity will be greater than the cost of debt. This is because the financial risk to shareholders is higher than it is to lenders, because the payments on a debt must be paid (a requirement by law), regardless of how a company has performed. Q15. How would you calculate the Cost of Equity? Sample Answer: To calculate the Cost of Equity I would divide the Dividends Per Share (DPS) by the Current Market Value of stock (CMV) and then add the Growth Rate of Dividends (GRD). Q16. How would you deal with a difficult client? Sample Answer: In a previous job I dealt with customers and clients on a regular basis and it was important to provide exceptional service at all times based on the customer service charter set by the company. One particular situation comes to mind where a client was contacting me virtually every day both by email and by telephone questioning the work I was doing on their behalf and also asking how much longer it would take to complete. Sometimes, their comments were rude and confrontational. I explained to them how important it was for me to spend time doing my work to a high standard, as this would save them money in the long term. I also gave them reassurances that I was genuinely trying to help them and that I would contact them with a weekly update moving forward to give them a progress report. By taking this approach, the relationship improved significantly and their tone and attitude towards my work was more pleasant and positive from there on in. I fully understand how important it is to provide outstanding service to your clients whilst working here as an Investment Banker and I will never let you down in regard to this important area. Q17. When making decisions as an investment banker that could have an impact on our organization, what factors would you consider? Sample Answer: Order ID: 0081249
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I would first of all consider the impact my decision would have on the organization as a whole, and also the specific individuals it would affect. There would be times where the decisions and recommendations I would make as an Investment Banker would just need to be implemented, especially in respect of obvious emerging trends of potential issues. However, prior to making important organizational-wide decisions, I would conduct a consultation process, especially with senior managers to decide how the decision or change would impact on them and their plans. My priority would always be the financial health and growth of the organization, and I would need to discuss important decisions with key individuals first before implementing them. My aim is to always work with people to make their lives easier, not against them. Q18. What is your approach to risk as an Investment Banker? Sample Answer: I would approach risk by using a qualitative analysis approach. In basic terms, I would make good use of a SWOT analysis and also utilize a ‘probability versus impact’ assessment. During any financial risk assessment, I feel it is very important to gather as much information as possible from a wide range of sources, including company performance data and accounting information. These sources can be based on historical evidence or facts derived from external organizations or financial market trends. You should also make good use of your internal team members and also utilize your own experiences and carefully analyse the data and information you have at your disposal. There is also the issue of ‘time’ when analysing risk. How much time you have will also have an impact on the risk weighting outcome. So, to answer your question, I would utilize as much information as possible whilst also using a systematic approach to analysing the benefits of taking the risk. I would also assess the appetite for risk from my senior management team, and clearly explain to them the risk versus benefits assessment and also the likely outcome of the project actions from my experience and perspective. Q19. What are the foundations of good business principles? Sample Answer: There are four core business principles that I believe an organization should adhere to and embed as part of their culture. The first principle is EXCEPTIONAL CLIENT SERVICE. You should always focus on the customer or client, you should invest for the long term and you should operate a local level which means the level of service you can provide is relevant, consistent and based on the needs of the client. The second principle is OPERATIONAL EXCELLENCE. An organization should have a very strong reputation for setting high standards, for being disciplined in its approach to risk and it should always make sure it has a rock-solid balance sheet. A business within this sector should be fully compliant, and Order ID: 0081249
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it should operate with efficiency and effectiveness. The third principle is COMMITMENT TO INTEGRITY, FAIRNESS AND RESPONSIBILITY. This means you should create a positive working environment for everyone that is respectful, inclusive and that demonstrates humanity and humility. Finally, the fourth principle is to have A GREAT TEAM AND A WINNING CULTURE. You should focus on hiring a diverse and talented team of people that encourages loyalty and strong morale. Everyone within the organization has to have a strong set of values and work ethics and you should aim to make it a place that people want to stay working for the long term. Q20. What are your strengths and weaknesses?
Sample Answer: My strengths are my positive and determined mindset, my ability to be keep working on tasks and projects until they are completed to the high standards required, and also my communication and interpersonal skills. I also feel I am very good at explaining and analysing complex financial reports and data and using them to achieve my objectives as an Investment Banker. My weakness is I am sometimes impatient. I like to get through my workload quickly and if I am held up by an external organization for example, I find this a bit frustrating at times. However, my strong communication and interpersonal skills, and my high energy levels, mean I am able to put across in a polite manner how important their work is to the completion of my own task. Q21. Define the term ‘financial risk’. Sample Answer: Financial risk is where an organization does not have the ability to pay its debts. That is why your organization sets very high standards in respect of financial risk assessment and it also acts responsibly in regard to its balance sheet. A strong balance sheet helps reduce organizational financial risk significantly. The more debt a company has, the greater the financial risk. Q22. How would you deal with conflict in a team? Sample Answer: Any form of conflict is usually negative, so I would look to deal with it as quickly as possible. I would speak to the individuals involved to see how we could work together to either eliminate the conflict entirely or reduce it. Sometimes, conflict can be healthy, as it helps breed creativity and competitiveness, and it can even bring teams closer together once the conflict is over. However, in the first instance, I would try to eliminate it by encouraging everyone to work together to overcome their differences and also Order ID: 0081249
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by reminding everyone within the team that we have a responsibility to act professionally and collaboratively as a group to help the organization move forward and grow. Q23. Talk me through your decision-making process. Sample Answer: When making important decisions at work, I always gather as much information and facts as possible. If a decision needed to be made in respect of a client, I will assess their needs, the needs of the organization and the risks versus benefits. It is very easy to make ill-informed and rash decisions, and this should be avoided at all costs. Once I have gathered all of the necessary information, I think about the possible options before defining a plan of action. Where appropriate, I will discuss the options I have available with other team members, as I feel it is important to gain another opinion and perspective on things. Throughout the decision-making process, I will always think ahead of how my actions will impact on the wider organization and its reputation. Q24. Tell me about a time when you demonstrated transparency at work. Sample Answer: I was in a work meeting one day discussing the team’s performance when I noticed an issue with the data that had been compiled. Everyone within the team was pleased with our performance and our sales were up 7.5% on the previous quarter. However, whilst looking into the data sheet a little more closely, it was clear the reporting had not been accurate and in fact, our performance was not quite as strong as it first appeared. I immediately brought this to the attention of the meeting chairperson who, after analysing the data right there in the room, agreed there had been a mistake. Although this had an immediate negative impact on the meeting morale, I felt it was important to be transparent and honest about my findings so the company could seek to improve where necessary. Q25. Describe a time when you worked as part of a team. Sample Answer: In a previous role, I volunteered to work with 5 other members to complete a difficult project that had fallen by the wayside due to a contractor going out of business. The task required all 5 of us to work closely together to integrate a new software system with the client’s website. We only had four days to complete the task in accordance with the specification and the client’s requirements. Time was of the essence and we needed to work hard to get everything done to a professional standard. We started out by reading the client brief carefully and then I decided to take the lead and allocate specific tasks based Order ID: 0081249
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on each team members capabilities and area of expertise. We then set timescales for each team member to reach, which would ensure the task got completed in time. Throughout the four-day working period, we all supported each other as and when required in order to motivate each other through regular communication. The end result was the project was completed on time and to a high standard, much to the satisfaction of the client. Q26. How do you keep your knowledge of the financial services and investment banking sector up to date? Sample Answer: I subscribe to The Economic Times to gain regular updates and news relating to the economy and the financial sector, and I also keep abreast of regulatory news from the Reuters website. I also check on a monthly basis the news section of the Financial Conduct Authority website from a Continuous Professional Development perspective and over the last two weeks in preparation for this interview I have been reading the latest news section of your website. Q27. Tell me about a recent financial article you've read and how it relates to investment banking. Sample Answer: I have been keeping a close eye on your website, especially in respect of the recent global pandemic and how this has affected financial markets and their long-term recovery. The most recent article I read was
‘
Eyes on Asia’s Path to Recovery’. It relates directly to investment banking because any negative impact long-term to financial markets will create opportunities for investors, but it can also act negatively too. It’s in all our interests for global markets to recover. The pandemic resulted in a Q1 contraction of 6.8% for China. However, the research conducted at your organization anticipates growth at 1% for Quarter 2 and, more optimistically, 5.1% growth for Quarter 3. Q28. Describe a situation you were in where you had to solve a difficult problem. Sample Answer: I was involved in a situation at work one afternoon where I volunteered to help another department within the organization solve a difficult problem. Someone had accidently lost a large number of important computer files that were being used as part of an important project, and it was vital the files were retrieved as soon as possible. Using a calm and logical approach, I contacted the server company to explore ways we could attempt to retrieve the files. I managed to find out a way to retrieve the lost files by utilizing the system restore facility, and after a couple of hours, all of the files were successfully Order ID: 0081249
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recovered, saving the project in the process. Whenever a difficult problem arises, I always take a calm and methodical approach to solving it by using fast action and logical thinking. Q29. Do you think working late as an Investment Banker is a good thing, or a bad thing? Sample Answer: To be truthful, I think it’s a good thing and it is needed. Of course, taking rest is important to be at the top of your work as an Investment Banker; however, I feel in the modern world we live in, where demands are higher, you have to be prepared to dedicate long hours. I have always worked late and will continue to do so when required to meet important deadlines and to also ensure the completion of tasks. The needs of the organization must always come first, and that will often mean having to work extra hours. Q30. Why do you want to leave your current job? Sample Answer: For the simple reason, I feel it is time for a change. My employer has been fantastic, and I very much enjoyed working for them, but I feel I have so much more to offer and I've been attracted to your company since first seeing in the job advert. I will leave my employer on great terms and I will miss the team, but I am looking forward positively to a new and fresh challenge where my skills and experiences can be fully utilized. Q31. Where do you see yourself in five years? Sample Answer: In five years, I see myself progressing within the company to the point where not only am not only well-
respected as an Investment Banker, but I’ve also taken on further responsibilities. I believe that, in five years’ time, I will have proven myself as an invaluable member of the investment banking team. I would also take great pleasure in assisting the training and development of newer colleagues who occupy a similar role within the team if required. Q32. Why should we hire you to work as an Investment Banker? Sample Answer: I am a standards-driven person who always takes responsibility for my actions. Over the years I have worked hard to improve my skills and also gain experience in areas that I feel will be a strong match for the values here at your organization. I will provide excellent client service; I will be a supportive team member and I will always put the objectives of the organization at the heart of everything I do. I am a Order ID: 0081249
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good communicator and I understand the importance of building long-term relationships both with work colleagues, external stakeholders and clients. In my current job, I have been consistently praised during my performance reviews for exceeding targets and for meeting high standards. I’ve been very excited in the build-up to my interview today and if I am successful, I promise I will always work hard, I will always improve and I will take responsibility for my career and carry out my duties with diligence, professionalism and passion. Q33. What are your salary expectations? Sample Answer: I have carried out some research in relation to the average salary for the position of investment banker, and the general range is between $80,000 and $100,000. Whilst I do personally feel I am worth the higher end of the salary scale I understand and appreciate I need to prove to you my worth. On that basis, I would be comfortable with a salary of $87,000. NOTE:
Please conduct your own research into the general salary range for the investment banking job you are applying for at your chosen organization. Q34. That’s the end of your Investment Banker job interview. Do you have any questions you’d like to ask us? Sample Answer:
Q. What are the plans for the organization over the next 5 to 10 years and how could I help you achieve them in this role? Q. What are the biggest challenges the organization is facing right now? Q. What would you need me to concentrate on in the first 30 days of starting work here? How to Use These Interview Questions and Answers: These interview questions and answers are intended to guide you in your preparation for your job interview. These questions have been picked by the PassMyInterview team because we believe that they are the best representative of what you will face in your interview. The sample answers in this resource are collated from years of experience and research in the recruitment sector. The answers confidently display the appropriate qualities and competencies that the interviewer expects from successful candidates. Order ID: 0081249
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Read the sample answers carefully, and take note of what skills and competencies they demonstrate. You might notice that, when the question asks for examples, the answer uses the STAR method to construct the response: Situation.
Start off your response to the interview question by explaining what the ‘situation’ was and who was involved. Task.
Once you have detailed the situation, explain what the ‘task’ was, or what needed to be done. Action.
Now explain what ‘action’ you took, and what action others took. Also explain why you took this particular course of action. Result.
Explain to the panel what you would do differently if the same situation arose again. It is good to be reflective at the end of your responses. This demonstrates a level of maturity and it will also show the panel that you are willing to learn from every experience. In order to get the best possible results, apply this system to your own examples and experiences in working life. These sample answers are intended to inspire you to create your own responses to the questions. Disclaimer: PassMyInterview is not responsible for anyone failing any part of any selection process as a result of the information contained within this resource. PassMyInterview and their authors cannot accept any responsibility for any errors or omissions within this resource, however caused. No responsibility for loss or damage occasioned by any person acting, or refraining from action, as a result of the material in this publication can be accepted by PassMyInterview. Get more guides, books and training courses at the website www.How2Become.com
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