A VP drops work on your desk that requires 2 hours and says he needs it in two hours, and before you can say anything, he leaves because he is catching a flight. Then the MD comes by and drops work on your desk that also requires 2 hours, and he says he needs it in two hours. Both the VP and MD are now on a plane and you cannot contact them. Whose work do you do? How do you deal with this situation?
Similar to the previous question, you need to understand the context of the file, the companies / industries involved, the client’s goals, and the relative importance and urgency of each client’s deliverable. To get this information, you can ask your colleagues who are either staffed on the file or work in a similar industry/product group. […]
What is the difference between a stock deal vs. an asset deal?
A stock deal is when an acquirer purchases all shares (ie equity ownership) of a firm to purchase the entire company. The acquiror assumes both the assets and liabilities of the company. This is by far the most common kind of deal. In a stock deal, proceeds to the seller are taxed at the capital […]
Private Equity: Walk me through your resume / tell me about yourself (1-3 min)
You want to tell a story about how you became interested in finance, investing, and improving businesses. It’s best to provide some context initially about yourself so the interviewer understands what’s unique about you: where you grew up, where you went to school, and how the first “spark” led to your interest in finance as […]
How do you account for convertible bonds in a DCF?
If the convertible bonds are in-the-money, meaning that the stock price is higher than the conversion price, then the bonds will convert into equity. This means more shares will be created, which will dilute the share price since the same enterprise value has to be spread over a larger share count. If the convertible bonds […]
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 working capital. This is […]
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 hard for customers to switch […]
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 and the steps you took to overcome […]
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 in the balance sheet. In order to […]
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.” Weaknesses like “focus too […]
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 or the EBITDA exit multiple method• Discount free cash flows and […]
