Citi IB Interview Questions

Calendarization is the process of converting a company's fiscal-year financial data into calendar-year equivalents by weighting overlapping fiscal periods proportionally, enabling apples-to-apples comparisons across peers with different fiscal year-ends.

The inventory write-down is an expense on the income statement. It lowers net income and gets added back in cash flow from operations, because no cash leaves. On the balance sheet it lowers inventory, lowers retained earnings by the after-tax amount and raises cash by the tax saving. The dividend payment and the debt buyback at face value both skip the income statement. Each one shows up only as a cash outflow in cash flow from financing, with a matching drop on the balance sheet: retained earnings fall for the dividend, and debt falls for the buyback.

Company A's EV/EBITDA is 12.5x ($1,250mm EV ÷ $100mm EBITDA), a 0.5x (~3.8%) discount to the 13.0x peer median, likely reflecting higher leverage, lower growth, or company-specific risk factors.

Under the standard interview simplification, adding $100mm to EBITDA has the bigger impact because it is capitalized at the exit multiple, while paying down $100mm of debt increases equity value by exactly $100mm. For example, at an 8.0× exit multiple, $100mm of incremental EBITDA would increase enterprise value — and therefore equity value, assuming no other changes — by about $800mm, versus only $100mm from debt paydown.

Jane Fraser has served as CEO of Citigroup since March 2021, making her the first woman to lead a major U.S. bank.

Precedent transactions, also called transaction comps, value a company off the multiples acquirers paid to buy similar companies in past M&A deals. You screen those deals for industry, size, and recency. For each one you build the transaction enterprise value, what the buyer paid for the equity plus the target's net debt at the time, and divide it by that target's financials as of the announcement. Apply the resulting multiple range to your own company's metric and you get an implied enterprise value, equity value, and price per share. These are prices paid for control of an entire company, so they typically carry a control premium, the amount above the pre-deal trading price a buyer pays to own and direct the whole business. That is why the range usually sits above where similar public companies trade today.

Net income goes up $3.75. On a cash sale, cash goes up $8.75. A 50% gross margin means the good cost $5 to make or buy, so the $10 sale leaves $5 of gross profit (revenue minus cost of goods sold, the direct cost of the item that was sold). Tax at 25% takes $1.25 of that and leaves net income of $3.75. Cash runs higher because the company already paid for that $5 of cost in an earlier period. It leaves this period as a $5 reduction in inventory, and the cash flow statement adds that $5 back: $3.75 plus $5 is $8.75.

WACC is the minimum return your business must earn to pay back everyone who gave you money—lenders and investors—weighted by how much each one chipped in, after accounting for the tax break on debt.

WACC is like buying a lemonade stand with money from your piggy bank and your sister's loan — it's the blended cost of keeping both happy, and your stand must earn at least that much or everyone loses.

It depends on the industry and the reason the working capital is elevated, but if I had to choose with no other information, I'd slightly prefer Company A. Accounts receivable is closer to cash because the sale has already occurred, while inventory still has to be sold and carries obsolescence, storage, and markdown risk. That said, I'd want to examine AR aging, bad debt reserves, customer concentration, and inventory turnover before making a real investment decision, because unusually high AR can also signal weak collections or aggressive revenue recognition.

Cost of capital is the minimum blended return a company must earn on its investments to satisfy all capital providers, calculated as the weighted average cost of debt (after tax) and equity — known as WACC.

A Salesforce–HubSpot merger would primarily create cost synergies from eliminating overlapping SG&A, go-to-market, and infrastructure spend, plus revenue synergies from cross-selling across SMB, mid-market, and enterprise customers. There could also be some financial benefits such as lower borrowing costs from greater scale and diversification, and potentially tax benefits if the target had usable NOLs, though those would be secondary to the operating synergies.