London Investment Banking Interview Questions

Model answer

The income statement shows profitability over a period, ending in net income. The cash flow statement starts from net income, adds back non-cash items (D&A, SBC), adjusts for changes in working capital, then shows investing and financing flows to reach the change in cash. The balance sheet is a point-in-time snapshot: net income flows into retained earnings, the ending cash from the CFS becomes cash on the BS, and PP&E links via capex and depreciation. Assets = liabilities + equity must always hold.

Model answer

The income statement shows profitability over a period (revenue down to net income). The balance sheet shows financial position at a point in time (assets = liabilities + equity). The cash flow statement shows actual cash movement over a period across operating, investing and financing, reconciling net income to the change in cash. They link: net income flows to the CFS and to retained earnings, and ending cash on the CFS is the cash line on the BS.

Model answer

Compare the cost of the acquisition financing to the earnings you buy. An all-stock deal is generally accretive when the acquirer's P/E is higher than the target's (paying with expensive stock for cheaper earnings). A cash or debt deal is accretive when the after-tax cost of cash or debt is below the target's earnings yield. Synergies and financing effects then adjust the result.

Model answer

Banking: transactions as the fastest way to learn how companies are valued, financed and sold; intensity and ownership early; evidence from things already done (internships, clubs, courses). Firm: concrete hooks — deals the firm did, group strengths, people spoken to (names if true), culture/platform fit. The firm part must be impossible to copy-paste to a competitor.