2022 - Page 8 of 9 - Finance Interview Coach

Published On - January 22, 2022

How do changes in net working capital affect the three statements?

Changes in net working capital do not affect the income statement. Changes in net working capital do affect the cash ﬂow statement, since we typically start with net income in the beginning of the cash ﬂ ow statement. Then we have to add back non-cash changes, which include changes in net workin...

Published On - January 20, 2022

Josh Corporate Banking / Commercial Banking / Private Debt, Corporate Development, Financial Modeling, FP&A, Investment Banking, Private Equity

What makes a good LBO candidate?

The most important characteristic of a good LBO candidate is stable cash flows since the PE owner will have to service the debt and stay within covenants in order for the investment to be successful. This means recurring revenue is very valuable, meaning that the revenue is “sticky” and it’s h...

Published On - January 18, 2022

Josh Investment Banking

Have you ever managed a team before? What was your role and what were your greatest challenges?

Any example from school, work, or extracurriculars is fine. Describe the context of the team’s goals and how you arrived into a leadership position. Elaborate on the challenges you faced and how you overcame them. Make sure to communicate clearly and provide tangible details on both the challenges...

Published On - January 18, 2022

Josh Investment Banking, Private Equity

If the balance sheet doesn’t balance, what does that mean? How can you fix that or prevent that while building a 3-statement financial model or LBO model?

Assets = Liabilities + Shareholder’s Equity Above is the balance sheet equation, which is saying that all assets must be funded by either liabilities (e.g. debt) or shareholder’s equity (e.g. money from private or public investors). If the equation does not balance, that means there is an error ...

Published On - January 14, 2022

Josh Behaviorals and Fit, Investment Banking

What’s Your Greatest Weakness?

Contrary to popular belief, you do want to give a real weakness instead of a “fake” weakness. However, you must frame it in a way that shows you have a strong awareness about this weakness, and have made significant steps to improve. Try to avoid cheesy weaknesses like “work too hard.” Weakn...

Published On - January 12, 2022

Josh Investment Banking

Walk me through a DCF.

• Understand the company and the industry in which it operates on a forward-looking basis• Make key assumptions about revenue growth, gross margins, SG&A, capex, etc.• Project unlevered free cash flows, typically 5 – 10 years• Derive terminal value by using perpetuity growth method...

Published On - January 10, 2022

Josh Corporate Banking / Commercial Banking / Private Debt, Corporate Development, Financial Modeling, FP&A, Investment Banking, Private Equity

What is net working capital?

Net working capital represents the money tied up in the daily operations of the business. This includes both current assets and current liabilities. On the current assets side, we typically include accounts receivable, inventory, and prepaid expenses as part of net working capital. All these items w...

Published On - January 8, 2022

Josh Corporate Banking / Commercial Banking / Private Debt, Corporate Development, Financial Modeling, FP&A, Investment Banking, Private Equity

What are the most important items to due diligence in an LBO?

Some of the most important due diligence is done on the industry, and this can include competitor analysis, pricing trends, volume analysis, and speaking with industry experts. Due diligence will also be done on the company’s growth and cost strategy, customers, customer contracts, products, distr...

Published On - January 7, 2022

Josh Investment Banking

Walk me through the 3 financial statements.

The income statement shows how profitable or unprofitable your business is. It typically contains revenue, COGS, SG&A, which gets you down to EBITDA, and then contains depreciation and amortization, interest, and tax, which gets you down to net income. The cash flow statement shows the cash comi...

Published On - January 6, 2022

Josh Corporate Banking / Commercial Banking / Private Debt, Corporate Development, Financial Modeling, FP&A, Investment Banking, Private Equity

What are the most important items to due diligence in an M&A deal?

The due diligence process for an M&A deal typically involves questioning and confirming all key aspects of the business, especially the growth trajectory of the business and industry. PE firms will often hire 3rd parties to help out with different aspects of due diligence. Some of the most impor...