Barclays IB Interview Questions

Take it in four steps. First, read the history: revenue growth split into new stores versus same-store sales, the margin trend, and how well profit converts into cash. Second, check the balance sheet for debt capacity. That tells you whether a dividend recap is possible. Third, ask whether the cash flow and balance sheet can fund acquisitions. Fourth, test the forecast against that history. In a dividend recap the company borrows new debt and pays it out to the owners as a dividend. It suits a coffee chain with stable cash flow and low leverage, but only if leverage still looks low once you count leases as debt and coverage stays healthy at 2025 interest rates.

Nothing hits the income statement at the time of purchase, because buying an asset is a capital expenditure rather than an expense. On the balance sheet, PP&E (property, plant and equipment: the long-lived physical assets a company owns) rises $150mm and debt rises $150mm, so assets and liabilities each grow by $150mm and equity is unchanged. On the cash flow statement, the purchase is a $150mm outflow in cash from investing and the borrowing is a $150mm inflow in cash from financing, so net cash ends flat.

Fix it by recording the missing $100 of depreciation. Depreciation is the expense that spreads the cost of a long-term asset over its useful life. At a 25% tax rate, net income falls $75. Cash rises $25, because depreciation uses no cash but still lowers taxes. On the balance sheet, PP&E (property, plant and equipment) falls $100 and cash rises $25, so assets fall $75. Retained earnings, the profits the company has kept over time, fall by the same $75.

A company typically pays for an acquisition in order of cost. Excess cash goes first (cash beyond what it needs to run the business). New debt comes next, up to the amount its credit profile can support. Newly issued stock comes last because it dilutes existing owners: each current shareholder ends up with a smaller slice of the company and its earnings. The order shifts when the buyer's shares are overvalued. A high price-to-earnings (P/E) multiple makes stock cheap to issue in earnings-per-share terms, so it can come before debt.

Start with equity value, the market value of the company's shares. Add total debt, preferred stock, and minority interest, then subtract cash and cash equivalents. What's left is enterprise value: the value of the core business to all capital providers, of which common shareholders are only one group.

Buying $60mm of inventory with cash has no effect on the income statement. The cost is expensed only when the goods are sold. On the cash flow statement, the inventory increase is a working capital use of cash: cash flow from operations (CFO) falls $60mm and cash ends $60mm lower. On the balance sheet, cash falls $60mm and inventory rises $60mm. Total assets stay flat and the balance sheet still balances.

Yes, it can be profitable, and in a typical deal it is. With no multiple expansion, the company sells at the same EBITDA multiple the sponsor paid. Two other drivers still raise equity value. The first is EBITDA growth: the same multiple applies to a bigger number. The second is debt paydown: more of the enterprise value belongs to the equity holders at exit.

No. Accretion means the buyer's earnings per share (EPS: net income divided by shares outstanding) rises after the deal. That is mostly a mechanical result of the price-to-earnings (P/E: share price divided by EPS) multiple paid and how the deal is financed. Value creation means the deal is worth more than it costs: the present value of the target's cash flows plus synergies (cost savings or extra revenue from combining) exceeds the price paid. Net present value (NPV) is positive, and return on invested capital (ROIC) beats the weighted average cost of capital (WACC), the blended return debt and equity investors require. An accretive deal can still destroy value if the buyer overpays, and a dilutive deal can create it.

Pick a company you have actually studied. Name two or three realistic targets and back each one with a clear screen. Start with strategic fit: what does the target add that the buyer lacks? A product, a customer base, a new region. Then affordability: can the buyer pay with cash, new debt (borrowing) or its own shares? Then feasibility: is the target likely to be for sale, and will it pass antitrust review (the regulator's check that a deal does not harm competition)? The interviewer cares more about your reasoning than the names, so tie every target back to the buyer's strategy.

Give the exact levels you checked that morning, then walk through the four-part market view. Headline: the current yield on each bond and which way it has moved lately. A yield is the annual return an investor earns at today's price, and Treasuries are bonds the US government issues. Banking implication: the 10-year sets the base rate for pricing long-term corporate bonds and for DCF discount rates, and it feeds into the cost of debt. Sector example: one industry where the rate level is changing deal activity. Question: what you are still watching that could move rates next.

A standard DCF uses unlevered free cash flow: the cash the business generates before any payments to lenders. You discount it at WACC (weighted average cost of capital, the blended return lenders and shareholders together require) to get enterprise value, the value of the whole business to all its capital providers. Interest stays out of the cash flows because the cost of debt is already built into WACC, so the projections cover the operating business and leave financing out. A levered DCF discounts cash flow after interest and debt repayments at the cost of equity. It is the less common variant, and it produces equity value, not enterprise value.

Companies care about accretion because equity research analysts, investors and boards track earnings per share (EPS, which is net income divided by shares outstanding). A dilutive deal lowers the buyer's pro forma EPS, meaning the combined company's projected EPS after the deal. It can push the stock price down and draw pushback from shareholders and directors. Accretion is a quick, public scorecard. It does not prove value. A deal creates value when its returns are higher than the price paid and the cost of the money used to fund it.