What does an investment bank actually do?
Beginner Investment Banking Interview Questions
A practical article-style question list for candidates building the base layer of investment banking technical prep.
OFFERGOBLIN/11 min read/12 sample questions
Beginner investment banking interview questions test whether you can explain the core language of the job without hiding behind jargon. The interviewer is usually checking for clean definitions, basic financial statement fluency, and enough business intuition to survive the first follow-up.
The sample questions below are drawn from the OFFERGOBLIN question bank. Some are authored ramp questions used to teach the first pass through the material, and others are historical interview-style prompts from bank-tagged question rows.
What this level tests
- Investment banking role and junior banker workflow
- Stocks, debt, enterprise value, and equity value
- Three-statement basics
- DCF and valuation vocabulary
- Introductory M&A and LBO concepts
Free sample questions from the question bank
Use this beginner list to practice short, direct answers. A good beginner answer should take 30-60 seconds, define the term, and name one trap or follow-up.
Advises companies on major transactions such as M&A and helps them raise capital through equity and debt offerings. The bank earns fees for advice, underwriting, execution, and distribution.
What does a junior banker actually do day-to-day?
Builds financial models, creates pitch books and process materials, researches companies and markets, tracks diligence, coordinates workstreams, and checks details for senior bankers and clients.
What is a stock?
A stock is an ownership claim on a company. Shareholders are residual owners: they benefit after creditors are paid, through dividends, voting rights, and price appreciation.
What are the 3 financial statements and how are they linked?
The Income Statement, Balance Sheet, and Cash Flow Statement are linked: Net Income flows into the CFS as its starting point and into Retained Earnings on the BS, while the CFS's ending cash balance feeds into the BS's cash line.
How does raising $100 in equity impact the financial statements?
Cash and shareholders' equity each rise by $100 on the balance sheet, the income statement is unaffected since equity issuance is not a revenue or expense event, and the cash flow statement shows +$100 in cash from financing.
What is time value of money?
A dollar today is worth more than a dollar in the future because it can be invested and because future cash flows carry risk. Valuation discounts future cash flows back to present value.
What is enterprise value?
Enterprise value is the total cost to acquire an entire business, calculated as equity value plus net debt (total debt, preferred stock, and minority interest, minus cash), representing the value of its core operating assets.
What are the 3 main valuation methods and how do they rank?
The three main valuation methods are trading comps, precedent transactions, and DCF. Precedents are usually highest because they include control premiums, trading comps are usually lower because they reflect minority public-market prices, and DCF has no fixed rank because it depends on assumptions.
Walk me through a DCF.
Project unlevered free cash flows over 5–10 years, discount them and a terminal value back at WACC to get enterprise value, then subtract net debt and divide by diluted shares for an implied share price.
What's the difference between a merger and an acquisition?
A merger usually describes two companies combining, while an acquisition means one company buys another. In practice, the terms overlap; the important points are control, consideration, valuation, and strategic rationale.
What is the goal of an LBO?
The goal of an LBO is to generate a high IRR (typically 20%+) on the sponsor's equity investment by using leverage to amplify returns through debt paydown, EBITDA growth, and potential multiple expansion.
You live in Finance World, where there are only 2 scenarios. 1: you can invest/borrow $100 for 1 year and you get/pay $106 at the end of a year. 2: You can invest/borrow $200 for 2 years and you get/pay $112 at the end of 2 years. What does your yield curve look like? What is the interest rate for year 2?
The yield curve is inverted (6.00% at year 1 vs. 5.83% at year 2), and the implied forward interest rate for year 2 is approximately 5.66%, derived from 1.12/1.06 − 1.
Beginner vs. intermediate vs. advanced question types
| Level | Question types | Example prompts | Ready when |
|---|---|---|---|
| Beginner | Definitions, accounting basics, basic valuation walkthroughs, fit vocabulary | What does an investment bank do? What is enterprise value? Walk me through a DCF. | You can explain the concept cleanly before the first follow-up. |
| Intermediate | DCF sensitivities, WACC, working capital, EV bridge, accretion/dilution | What happens if taxes fall in a DCF? How do AP days affect valuation? | You can connect formulas to valuation direction and name the trap. |
| Advanced | LBO returns, sponsor logic, synergy sharing, sector valuation, terminal value edge cases | Calculate the LBO IRR. Why would a buyer not pay away all synergy value? | You can answer under pressure and defend the assumption set. |