Fast career growth, vast job opportunities, and fat paychecks have attracted finance professionals to the investment banking industry. To get into this highly competitive field, it is important to prepare well. Start by deciding early that you want to pursue an investment banking career path, upscale your technical and soft skills, speak to the experts and coaches, and do your best in the investment banking job interview.
How To Prepare for an Investment Banking Interview?
Investment bankers have a key role to play. These professionals help clients raise capital to fund business expansion activities. The interviewers check the technical or subject knowledge of the candidates and assess them on their non-technical skills, too.
Here is a comprehensive guide that will help you with investment banking interview preparation.
Resume Preparation
You must review the job description applying for an investment banking role. This will help you understand the requirements of the position. Prepare your resume according to the given job description. Include related keywords and phrases in your resume to exhibit your expertise in the field.
Non-Verbal Communication
Dress professionally for the interview. The organization needs you to look clean and groomed. Take care of your presentation and body language. Sit up straight. Look pleasing and confident. Make eye contact with the interviewer and listen actively. Practice these things to impress the interviewer.
Communication Skills
It is challenging to prepare for this portion. It is crucial to hone your communication skills to convey your story and ideas better clearly. This skill is vital for communicating effectively with your future clients. Interviewers have a keen interest in determining you are good at it and you will be able to handle the clients efficiently or not.
Quantitative Interview
The recruiter will test the candidate’s technical knowledge part of the interview process. You should dedicate a considerable amount of time to preparing for technical questions. Read online, download free sample questions and answers, watch mock interview videos, etc. Hence, we include some of the most common topics to know.
Financial Statements
Exhibit your knowledge about the three financial statements. The income statement is a financial statement that includes the figures of profitability. Similarly, it consists of revenue lines and net income. The income statement can be for a quarter or year. The balance sheet is financial statement that summarizes the company’s finances at a certain time. It includes the assets and liabilities. The cash flow statement is like the cash account on the balance sheet. Investment banking courses help you with all the technical concepts.
Cost of Equity and Cost of Debt
Know how to calculate the cost of equity. CAPM, or capital asset pricing model, is a commonly used method to calculate the same. The CAPM establishes a connection between the expected return and investing risk. The cost of equity is higher that of debt as the latter is tax deductible. The cost of equity is higher as the equity investors do not get predictable payments.
Company Valuation
Firstly, DCF is an intrinsic value technique that means the value of an asset is equal to the future free cash flow current value. The unleveled DCF gives the enterprise value or firm valuation. The net debt is deducted to calculate the equity value. Secondly, Equity value per share can be calculated by dividing the equity value of the company’s outstanding shares. The comps approach is the relative valuation that includes the companies or comparable peer groups. These companies belong to the same industry with metrics like growth, risk, capital return, etc.
| Read More: Investment Banking Career Path
Weighted average cost of capital
WACC is the return on investment in a company. To get WACC, a company’s proportional debt and equity is added. The same is multiple by the cost of debt and equity. In the formula,
WACC = (E/V x Re) + (D/V x Rd x (1-Tc))
Example, E or equity is the company’s outstanding shares market value. D is the company’s debt, V is the company’s value, Re is the cost of equity, and Rd is the cost of debt. Tc is the corporate tax rate.
In conclusion
The recruiter may design questions where you would be ask to suggest ideas in specific situations. You give concise answers using the STAR method, which includes Situation, Task, Action, and Result. Investment bankers work long hours, use this opportunity to talk about how you delivered quality work in a challenging work environment.