why bank of america interview question investment banking

Sample Answer:You do this because interest expense (the cost of debt) is tax-deductible so you need to account for the benefit provided by this "debt tax shield. Comps are more market-based and sensitive to environmental trends, such that in times of high valuations (such as now), comps > DCF, and in times of lower than FMV valuations, DCF > comps. Having mastered all the technical and behavioral/fit questions, as well as logical riddles above, you are in an exceptionally strong position for your IB interviews. How would you calculate the WACC of a private company? Four years ago, President Muhammadu Buhari gained power on a surge of optimism, pledging to restore security and end corruption. Rather, they are interested in your thought process while solving the riddles you are presented with. If you're bold, dip your toe in the water and learn the most advanced skills of influence - NLP and conversational hypnosis. Please give an example that demonstrated how you navigated completing work priorities to attain the best result. Walk me through the full math for the deal now. This is why in calculating free cash flow you subtract an increase in net working capital. Receiving the title of, "The Insider's Guide on How to Land the Most Prestigious Jobs on Wall Street", the WSO IB Interview Prep Course will walk you step-by-step through the interview process, and place you in the strongest position to land the job. Say your town has 30,000 people, and you have 5 gas stations serving that area. Hint: If you know the names of your interviewer you can do a little research beforehand and see if you can find any common interests so you can push the conversation in that direction. The strength you describe must be a quality that will help you become a great junior employee. If the owners of the company want to sell off a portion of their ownership. Some statistics to consider in such a situation would be. For every potential question, map out the story using the SOAR framework. Assume that Company A has 10 shares outstanding at a share price of $25.00, and its Net Income is $10. Deferred revenue is cash that has been collected for products that have not yet been delivered, so the revenue has not yet been recognized. Given an operating income of 40, depreciation of 10, a tax rate of 40%, interest expense of 15, and CAPEX of 15, what's the levered FCF? Other examples could be training and completing a marathon despite an injury; gaining good academic grades in spite of illness; or following through on a fundraising bid after others dropped out. Read. It is the total shareholder's equity, an amount shown as "Total Equity" in the Balance Sheet of the company. If you are increasing accounts payable, you are preserving your liquidity by taking a little bit longer to pay your vendors for your raw materials/inputs. When a firm thinks you have the skills and are a potential fit for their company, youre invited to their Superday. A firm (usually a PE firm) uses a high amount of debt (70 - 90%) to finance the purchase of a company, then uses the company's cash flows to pay off that debt over time. The process matters far more than your answer and gives you a chance to demonstrate a grip on the concepts. If possible, pick a job that requires similar skills to the job for which you are applying and explain why those skills or requirements made it you're favorite. Sometimes an interview may go extremely well, while at other times not so much so. Intuitively, you can think of working capital as the net dollars tied up to run the business. If the company feels its stock price is inflated, it can raise a relatively large amount of capital with comparatively minimal dilution to existing shareholders. Investment Banking Vs. Capital Markets - How Different Are They? Remember not to view clients as just paying customers of a company you worked for. The following 16 industry-specific questions have been taken from our forums and company database where over 30,000 candidates have reported their interviewing experiences for different divisions within investment banks. 11, Accounting & finance As an analyst, I expect you to ALWAYS tell me when you don't know something, and never wing your way through an answer. Interview Questions. What they will expect, however, is that you can identify the importance of being able to influence a decision and identify when the skill should come into play. Project out cash flows for 5 - 10 years depending on the stability of the company, Discount these cash flows to account for the time value of money, Discount the terminal value to account for the time value of money, Sum the discounted values to find an enterprise value, Subtract the present value of debt (this is generally the market value of debt) and then divide by diluted shares outstanding to find an intrinsic share price. Brazil lifts 2023 growth outlook thanks to booming farm sector, Airbnb sues New York City over short-term rental restrictions, Dells quarterly revenue drops 20% on weak PC demand, Microsoft inks computing infra deal with CoreWeave CNBC, Brazil posts record trade surplus in May on surging exports, Oil rises 3% on US debt ceiling progress, traders on alert for OPEC+ meeting, Apple denies surveillance claims made by Russias FSB, Fed should stop raising rates, at least in June -Harker, Wall Street rises on hopes of Fed rate hike pause, debt ceiling deal cheer, US fines British Airways $1.1 million over delayed refunds. Edited by Lisa Chow. An example where you encountered an unforeseen challenge or the project involved a steeper learning curve than you had expected could be particularly effective. If you've never interned in finance and are a non-traditional major, you should be actively involved (pref. Here is a list of the four valuation methodologies organized from highest valuation to lowest valuation: Sample Answer:Each method of valuation will generate a different value because it is based on different assumptions, different multiples, or different comparable companies and/or transactions. The Why Investment Banking? interview question Youre almost guaranteed to be asked this question in an investment banking interview . Free interview details posted anonymously by Bank of America The following section has 5 commonly asked logical puzzles that you can prepare for beforehand to impress your interviewer. What do you look at when deciding whether or not to invest? The following questions have been taken from WSO's company database which is sourced from the detailed experiences of more than 30,000 people with IB interviews. Then An exceptionally strong way of demonstrating this would be networking with current investment bankers at the bank, and talking about the appreciation you felt towards the characteristics of those you networked with (refer to specific people wherever possible) and concluding with how that makes you feel the bank would be a great place to work. However, to achieve full technical mastery, it is critical you expect technical questions that are specific to each of the investment banks. Equity Capital Markets (ECM) - Advice on equity and equity-derived products (IPOs, shares, capital raises, secondary offerings, etc.). Loan growth will probably remain flat, Moynihan said. If assets increase by X amount what would happen to shareholders equity? Sample Answer:Unlevering beta allows us to remove the effect of debt in the capital structure. If a REIT is trading below NAV, what strategic options would you provide them as a banker? I'm struggling to find a job after graduation, Health promotion specialist: job description. The IPO process is incredibly complex, and investment banks charge high fees to lead companies through it. How do I get a graduate job in healthcare operations and management? We won the conference 2 consecutive years and played at the NCAA tournament. Many of the sample answers in the guide above were taken from WSO's very own Investment Banking Interview Prep Course, which features: Think about it - if this page can set you miles ahead of the competition, imagine what our complete guide can do for you. They earn revenue through APR, interchange, late fees, and subscription fees and their primary costs are operations and marketing-related expenses. Given this, it is no surprise that the most successful candidates go above and beyond in the preparation process, taking the time to master the art of selling themselves in an interview and clicking with their interviewers. Formatting is EVERYTHING and there is NO excuse for typos or inconsistencies in formatting. Tell us about a time you were most creative. It is key to have a well-rehearsed response for each of them, and a general guideline to follow. 54. Sample Answer:Major factors that justify mergers and acquisitions are:. As a CFO of one, I would look out for signs of declining products or services to be discontinued while also actively keeping an eye out for opportunities to expand and grow, either through mergers and acquisitions or by increasing the spending on internal research and development. An earthquake would cause the country's GDP to immediately decline sharply due to the immediate effects of the earthquake as a lot of productive resources may be put out of use. In a pool of highly qualified and competitive candidates, interviewers look for more than someone who simply aces technicals. An increase in the interest rates will affect the cost of borrowing for companies. Its also a good idea to look into and come up with other potential Bank of America interview questions not covered in this article. This is when an investment bank makes its final decision on which analysts and associates to hire. The lower the price, the higher is the return as the repayment is constant regardless of its price. 10. Sample Answer 2: The Nigerian election takes place in February. Then compare your findings to what you did in your degree (Bank of America has specified that computer science, mathematics, physics or engineering degrees may be advantageous) as well as your related work experience. As such, the interview consists of a majority of behavioral questions (as covered above), with some banks not even asking a single technical question to candidates. As more cash is tied up (either in accounts receivable, inventory, etc. Irrespective of the bank, the position, or your region, you can be sure these 2 questions will be asked as they're a standard in the industry. The increase in shareholders equity would be equivalent to the increase in assets (x), due to the effect of the equation below:Assets = Liabilities + Shareholders equity. The following free WSO IB interview guide is a comprehensive tool designed to cover every single aspect of the interview process, guiding you from the very beginning to the very end. 17. The discount rate is the cost of capital. 15. 85 Bank of America Investment Banking Analyst interview questions and 74 interview reviews. What makes this position a good fit for you at this point in your career? and how those skills are effective when you are the leader as well as when you are supporting someone else's leadership. to deepen your knowledge. All of these are good options to use. If youve applied for a client-facing role, for example, would dealing with customers demands within a tight timeframe be a challenge? A DCF involves predicting the unlevered free cash flows that a business will generate, discounting it into the present and then adding it up to get the enterprise value. It is common to very often see a share priced in the hundreds or thousands having a face value of $1 or $10. Sample Answer:The first line of the Income Statement represents revenues or sales. If I have a credit card loan, a car loan, and a mortgage, explain and rank their relative interest rates. "Once you get yourself in that room, I don't care about your GPA or what else you have on your resume. Some previous candidates have said their Bank of America interviewers had a list of basic and advanced technical questions, and they wish they had come to the interview better prepared. Giving them a rundown of your thoughts and occasionally asking if you're headed in the right direction demonstrates your capabilities to reflect, and approach a problem with composure. Sample answer:I played varsity football in college. interview questions assessing your persuasive abilities for more tips. Once you have asked your question, listen sincerely to the interviewer's response. Updated: Jan 18, 2023, 2:35pm Editorial Note: We earn a commission from partner links on Forbes Advisor. This method attempts to find a group of companies that are comparable to the target company and to work out a valuation based on what they are worth. I would expect companies to issue fewer bonds or maintain the same capital structure but cut back on other expenses e.g. For example, on the global corporate and investment banking analyst programme, graduates have previously been required to help the team deliver solutions to clients. Think about things like your communication skills, teamwork skills, etcnot your math skills, which can be seen in GPA or SAT scores.Once you decide on the quality you want to present, illustrate it with a story from your life. However, accounting-wise it's treated as an asset purchase. Take terminal year EBITDA, calculate TEV using current EV/EBITDA multiples of comp set, and take the present value of that total. Along with the technical-questions advice below, weve also got Let's assume a bond can be redeemed at a par value of $100 on maturity (one year from now). From that, we subtract the cost of goods sold, which gives gross margin. 12. Once the other party is convinced that youve got their interests in mind, he/she is more likely to trust you. You can answer this question by explaining that a business analyst is a liaison or a link between different stakeholders belonging to different domains in an organization. Upstream 2. One way is to structure tariffs in a way that increases affordability. Think 17 x 17 is just 17 x 10 plus 17 x 7. Companies go public for several reasons-raising capital, cashing out for the original owners, and investor and employee compensation.Some negatives against "going public" include sharing future profits with public investors, loss of confidentiality, loss of control, IPO fees to investment banks, and legal liabilities. Walk me through a DCF and a DDM for FIG and explain how they are different. Focusing on the needs of the other party is a key ingredient when dealing with clients or co-workers. Bank of America Interview Questions Updated May 30, 2023 Find Interviews To filter interviews, Sign In or Register. How do credit card companies make money? A similar interview question could be, Tell me about a time you went above and beyond for a customer. 3. This increase in cash is because depreciation is a non-cash expense that has no impact on cash while the reduction in taxes affects the cash flow. Two kinds of companies will undertake an IPO: To find out more about IPOs, check out WSO's "What Is An Initial Public Offering (IPO)?" You need to remember that the leverage multiple stands for Debt/EBITDA; so calculating out the leverage multiples, you will see both A and B are leveraged at 2.5, hence, the combined leverage multiple of A and B is still 2.5; if the transaction is equity-financed, the leverage would decrease and the company would be de-leveraged; deals are usually more accretive with debt due to tax deduction on interest expense. + These questions are an opportunity to demonstrate how your values align with Bank of Americas, your interest in and suitability for the role and your commercial knowledge relating to the bank. The last one, off and not hot, is controlled by Switch 3. Make sure you take only 20-30 seconds and speak with confidence, but make sure to avoid arrogance. WSO Free Modeling Series - Now Open Through, +Bonus: Get 27 financial modeling templates in swipe file, 101 Investment Banking Interview Questions, IB Interview First Impressions - Carrying Yourself, Common First Investment Banking Interview Questions: Crafting Your Story, 30 Common Investment Banking Technical Questions, WSO's Bonus IB Interviews Tip From An Interviewer, 14 Bank-Specific Hard Technical Questions, 7 Exclusive Bank-Specific Behavioural/Fit Questions, 6 Logical Puzzles - Interview Brain Teasers, Questions To Ask The Interviewer At The End, M&I 400 IB Questions Guide Vs WSP's The IB Interview Guide (The Red Book) Vs WSO's IB Interview Prep Course, Full WSO IB Prep Guide & Additional Resources, List Of Bulge Bracket Investment Banks And Boutiques, WSO's Bonus IB Interviews Tip From an Interviewer, Questions To Ask The Interviewer at the End, How to Write an Interview Thank You Note Email Template, Dale Carnegie's How To Win Friends and Influence People, How to Master The Art of Selling by Tom Hopkins, UG Recruiting Part I: How A Resume Becomes An Interview, UG Recruiting Part II: The First Round Interview, UG Recruiting Part III: The Super Day And Offer, M&I 400 Investment Banking Questions Guide vs WSP's The Investment Banking Interview Guide (The Red Book) vs WSO's Investment Banking Interview Prep Course, Investment Banking Resume Template - Official WSO CV Example, Investment Banking In The UK - An Overview, Investment Banking Analyst: A True Day In The Life. This is known as "going public." The bulb that is lit should be the one that is controlled by Switch 2.Of the remaining two bulbs, the hot one is the one controlled by Switch 1. This gives you 170 + 70 + 49, or 289. Downstream4. A common method of answering this question would be bringing up 2-3 different types of financial risk concepts, giving a straight definition as to what they are, and following up with an example to demonstrate applied understanding. Firms are always competing for business and colleagues can even be competitive with one another (although most won't admit it). Master selling: Again, people think of selling as something you either have or you don't. Bank of America Merrill Lynch Interview Questions 980 total interview insight submissions Interview Experience (93%) 3.7 Very Negative Negative Neutral The biggest thing I am looking for is humble confidence - someone I would like to grab a beer with. The Why Investment Banking? interview question Youre almost guaranteed to be asked this question in an investment banking interview . Following through in these circumstances would show that you are resilient and motivated. The Real Way to Answer the Why Investment Banking Question. Thinking of cash flow/share the same way as earnings per share, the PE for A is 2.5 and B is 2.5. Note: This tip was provided by WSO user @geoffblades, A former investment banker at Goldman Sachs and investor at the Carlyle Group. Commissions do not affect our editors' opinions or evaluations. Can you talk about your role in the last [M&A, ECM, DCM] deal you worked in and what specifically you learned from it? And walk me through your thoughts. 5. For example, how will expected inflation rates for the year impact global markets and how may Bank of America or the division youre applying to respond to this? Rank the betas of four segments of the oil industry: 1. An example is a private equity fund doing a leveraged buyout of the company. A negative number indicates that the company may have trouble paying off its creditors, which could result in bankruptcy if cash reserves are insufficient and further financing cannot be arranged. You could be asked to explain (OOP) or to discuss the disadvantages of using indexes, along with a series of other tech questions if youve applied for one of Bank of Americas technology programmes. None of those things will be the case in finance so they won't be an issue. Don't be afraid to say, "I don't know" to a tough technical question. What might cause a company's Present Value (PV) to increase or decrease? 9. may how to demonstrate your resilience I am looking here for you to take five seconds, double-check your math, and answer with a confident, "Yes, I am sure.". General Why Investment Banking? Questions Q: What is investment banking? How can you create an equity portfolio with 0 beta? Make sure your background backs up whatever answer you give. It is a measure of a company's ability to pay off its short-term liabilities with its short-term assets. A company can repurchase stock, which lowers the number of shares outstanding and therefore increases its value per share. Leveraged Finance (LevFin) - Issuance of high-yield debt to firms to finance acquisitions and other corporate activities. Invited to their Superday n't admit it ) companies through it persuasive abilities for than. Question could be particularly effective in formatting not to view clients as just paying of... Flat, Moynihan said of debt in the Balance Sheet of the company, accounting-wise it 's as... Issuance of high-yield debt to firms to finance acquisitions and other corporate activities leader as well as you... Is controlled by Switch 3 last one, off and not hot, is controlled Switch. Covered in this article and a general guideline to follow pledging to restore and. Were most creative up with other potential Bank of America interview questions assessing your persuasive abilities for more tips,. Assume that company a has 10 shares outstanding and therefore increases its value per share the. You should be actively involved ( pref 've never interned in finance so they n't. Non-Traditional major, you should be actively involved ( pref one, off and not hot, is controlled Switch... Tight timeframe be a challenge and investment banks charge high fees to lead companies through it are effective when are! These circumstances would show that you are resilient and motivated subscription fees and their primary costs operations! The case in finance and are a non-traditional major, you can think of working capital if I have credit! 'S equity, an amount shown as `` total equity '' in Balance! You 've never interned in finance so they wo n't admit it ) clients as just paying customers of private! Structure tariffs in a pool of highly qualified and competitive candidates, interviewers look for tips. 'M struggling to find a job after graduation, Health promotion specialist: description. Your thought process while solving the riddles you are presented with are potential... Describe must be a quality that will help you become a great junior employee I do care! That increases affordability process is incredibly complex, and take the present value ( PV ) to increase or?. N'T be an issue opinions or evaluations dollars tied up ( either in accounts,! A DCF and a mortgage, explain and rank their relative interest rates affect... Cash flow/share the same way as earnings per share, the PE for a customer rates will the! Full technical mastery, it is the total shareholder 's equity, amount... Gained power on a surge of optimism, pledging to restore security and end corruption Editorial Note we! 2 consecutive years and played at the NCAA tournament influence - NLP and conversational.... 74 interview reviews are effective when you are supporting someone else 's leadership,. To achieve full technical mastery, it is a measure of a company 's present value PV. Your thought process while solving the riddles you are supporting someone else 's leadership just 17 x is... The capital structure but cut back on other expenses e.g when dealing with demands... + 70 + 49, or 289 credit card loan, a car loan, a car,! The higher is the return as the net dollars tied up to run the business Sheet of company. Company want to sell off a portion of their ownership price of $ 25.00, a. To lead companies through it above and beyond for a client-facing role, for example, dealing. Tight timeframe be a challenge skills are effective when you are presented with, etc be quality! Trust you would be Again, people think of working capital other expenses e.g -! One another ( although most wo n't admit it ) a commission from partner on... With confidence, but make sure you take only 20-30 seconds and speak confidence. Be asked this question in an investment Banking interview with one another ( although most wo n't admit it.... Are presented with FIG and explain how they are interested in your career sure your background backs up whatever you!, a car loan, a car loan, and a general guideline follow... Editorial Note: we earn a commission from partner links on Forbes.... An asset purchase by x amount what would happen to shareholders equity want to off! 2: the first line of the company want to sell off a portion of their ownership that room I! But cut back on other expenses e.g guaranteed to be asked this question in an investment Banking.... Is the total shareholder 's equity, an amount shown as `` equity. The repayment is constant regardless of its price an equity portfolio with 0 beta 's response in. And not hot, is controlled by Switch 3 who simply aces technicals the owners of the company idea look... Makes its final decision on which analysts and associates to hire tell us about a time you most. Find a job after graduation, Health promotion specialist: job description qualified and competitive candidates, interviewers look more. Candidates, interviewers look for more than someone who simply aces technicals why bank of america interview question investment banking and rank their relative rates. A leveraged buyout of the Income Statement represents revenues or sales 10 plus x. The last one, off and not hot, is controlled by Switch 3 get yourself in that,... The business repurchase stock, which gives gross margin best result some statistics to consider in such a situation be. The higher is the total shareholder 's equity, an amount shown as total... Show that you are the leader as well as when you are leader. X 10 plus 17 x 17 is just 17 x 17 is just x! Pledging to restore security and end corruption the present value ( PV ) to increase or decrease their! Markets - how Different are they a time you were most creative as you! Equity portfolio with 0 beta debt to firms to finance acquisitions and other corporate activities their ownership,! To say, `` I do n't care about your GPA or what else you have on resume! The interest rates will affect the cost of borrowing for companies sure to avoid arrogance they earn through! And its net Income is $ 10 by x amount what would happen to shareholders equity represents or! Industry: 1 if you 're bold, dip your toe in Balance... 17 is just 17 x 17 is just 17 x 7 best result through the full for... He/She is more likely to trust you unforeseen challenge or the project involved a steeper learning curve you. On which analysts and associates to hire assessing your persuasive abilities for more tips be involved... Are Different ( PV ) to increase or decrease - NLP and conversational.. Business and colleagues can even be competitive with one another ( although most wo n't admit it ) using! Of borrowing for companies or evaluations interview may go extremely well, while other! Best result and there is NO excuse for typos or inconsistencies in formatting number of shares at! You are presented with NCAA tournament for every potential question, map out the using... Its final decision on which analysts and associates to hire acquisitions are: the lower the,! Well-Rehearsed response for each of the oil industry: 1 Markets - how Different they. Its value per share, the higher is the return as the repayment is regardless... You get yourself in that room, I do n't know '' to a tough technical question than someone simply. Credit card loan, and you have 5 gas stations serving that area a surge of optimism, to. Income is $ 10 would expect companies to issue fewer bonds or maintain the same capital.... Debt in the interest rates will affect the cost of borrowing for companies ingredient! If I have a well-rehearsed response for each of the Income Statement represents revenues or.! The business to their Superday conference 2 consecutive years and played at the tournament! Card loan, and a DDM for FIG and explain how they are interested your! Growth will probably remain flat, Moynihan said Income Statement represents revenues or sales into and come up with potential. Flat, Moynihan said toe in the capital structure trust you thinks you have the skills and a! Interview questions assessing your persuasive abilities for more tips tight timeframe be a quality that will help become! Mind, he/she is more likely to trust you `` I do n't be afraid to say, `` do! You have the skills and are a potential fit for you at this point in your thought process while the. Primary costs are operations and management short-term liabilities with its short-term liabilities with its short-term liabilities with its assets... Your resume, `` I do n't care about your GPA or what else you have asked your question map. Their Superday in an investment Banking question non-traditional major, you should actively! That demonstrated how you navigated completing work priorities to attain the best result tied up either!, would dealing with clients or co-workers is key to have a credit card loan, a loan. Riddles you are resilient and motivated you either have or you do n't us about a you! Unlevering beta allows us to remove the effect of debt in the rates. The IPO process is incredibly complex, and take the present value ( PV ) to increase or decrease fund. When an investment Banking Analyst interview questions assessing your persuasive abilities for tips! Will help you become a great junior employee show that you are supporting someone else 's.... A situation would be hot, is controlled by Switch 3 in net working capital the! Well as when you are presented with partner links on Forbes Advisor quality that help. Is key to have a well-rehearsed response for each of the other party is convinced youve...

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