Investment Banking Interview Preparation: Financial Modelling and Valuation Skills to Know

Investment banking interviews can include technical questions on accounting, financial modelling, valuation and transactions. CFI and Wall Street Prep both highlight financial statements, valuation methods and financial modelling among the areas candidates should prepare.

For effective investment banking interview preparation, focus on understanding how financial concepts connect rather than memorising individual answers.

Which Financial Modelling Skills Should You Prepare for an Investment Banking Interview?

Financial modelling questions can test whether you understand financial statements, assumptions, forecasts and how different parts of a model connect.

1. Three-Statement Modelling

Know how the income statement, balance sheet and cash flow statement work together. You should also understand how changes in items such as depreciation, working capital and debt can affect the statements.

2. Financial Statement Analysis

Be prepared to explain revenue, expenses, EBITDA, net income, cash flow, assets, liabilities and equity. Questions may also test how an accounting change affects profitability, cash flow or valuation.

3. Excel and Financial Modelling

A financial modelling interview may test your understanding of model structure, assumptions, formulas, forecasts and sensitivity analysis. CFI notes that financial models are commonly built in Excel and can support forecasting, valuation and transaction analysis.

4. Forecasting and Assumptions

Understand how historical financial information can be used to make projections. You should be able to explain the assumptions behind revenue growth, margins, working capital, capital expenditure and other major drivers.

Valuation Skills that Matter in an Investment Banking Interview?

Valuation is a major part of technical interview preparation. Common questions can ask you to explain how a company is valued and compare different valuation approaches.

1. Discounted Cash Flow Valuation

Know the basic steps of a DCF: forecast future cash flows, calculate terminal value and discount the cash flows to their present value. In an unlevered DCF, WACC is used as the discount rate.

2. Comparable Company Analysis

Prepare to explain how similar companies can be compared using valuation multiples. Common multiples include EV/Revenue, EV/EBITDA and P/E, although the relevant multiple can vary by industry.

3. Precedent Transactions

Understand how companies can be valued using multiples observed in previous acquisitions or transactions. Be ready to explain why transaction context matters when comparing deals.

4. Enterprise Value and Equity Value

Know the difference between enterprise value and equity value and how the two are connected. This is a common area of questioning in a valuation interview.

5. Valuation Multiples

You should be able to explain what major multiples represent, why they are used and what can cause one company to trade at a different multiple from another.

M&A, LBO and Capital Markets Concepts You Should Revise before the Interview

Investment banking interviews can also test transaction-related concepts, particularly for roles involving M&A, capital raising or private equity.

1. M&A Modelling

Revise acquisition basics, deal structure, purchase price and the difference between accretive and dilutive transactions. M&A questions can also involve synergies and valuation.

2. LBO Modelling

Understand how an LBO uses debt and equity financing, how returns are generated and how an exit affects investor returns. You should also know the purpose of an LBO model.

3. IPOs and Capital Raising

Revise the basics of equity and debt capital raising, including why a company may choose debt or equity financing. These concepts can be relevant when discussing capital markets transactions.

4. Transaction Analysis

Practise connecting valuation and financial modelling to real transactions. This can make it easier to explain how theoretical concepts are applied in investment banking.

How Can You Prepare for Financial Modelling and Valuation Interview Questions?

Knowing the concepts is only one part of investment banking interview preparation. You should also practise explaining your reasoning and working through questions under time constraints.

1. Practise Common Technical Questions

Work through questions on financial statements, valuation, DCF, multiples, enterprise value and financial modelling. CFI and Wall Street Prep both provide interview question sets covering these areas.

2. Explain Your Calculations

Do not focus only on reaching the final number. Practise explaining the assumptions, formulas and reasoning behind your answer.

3. Build Models Yourself

Instead of only reading about financial models, practise building simple three-statement and DCF models. This helps you understand how assumptions flow through a model.

4. Practise Case-Based Questions

Use transaction examples to connect financial modelling and valuation concepts. Case-based practice can also help you explain why a particular method or assumption is being used.

5. Prepare for Follow-Up Questions

Interviewers may ask you to explain the impact of changing an assumption or applying another valuation method. Practise thinking through these changes rather than memorising fixed answers.

Prepare For Investment Banking Interview With PW Skills Investment Banking Course

The PW Skills Investment Banking Course combines financial modelling, valuation, M&A, LBO and capital markets concepts with practical case studies and projects. The course also includes interview preparation and career support on applicable plans.

1. Build Financial Modelling Skills

The course includes hands-on financial modelling training focused on industry-standard models used in investment banking and corporate finance. This can help you practise concepts relevant to a financial modelling interview.

2. Practise Valuation and DCF

You can learn DCF, comparable companies and transaction multiples as part of the business valuation component. These areas directly relate to common valuation interview topics.

3. Work on M&A and LBO Modelling

The course also covers deal structuring, acquisitions and leveraged buyout modelling through practical examples.

4. Learn Through Industry Case Studies

The course offers real industry case studies, including transactions covering IPOs, debt capital markets, M&A, LBOs and corporate restructuring. The Pro Plan includes five industry case studies.

5. Get Interview and Career Support

The course includes resume guidance, interview preparation and placement assistance under the Pro Plan. Its learning mode combines recorded content with live doubt sessions.

A strong preparation plan should cover financial statements, financial modelling, Excel, DCF, comparable companies, transaction multiples and core M&A and LBO concepts. You should also practise explaining your calculations and reasoning clearly.

The PW Skills Investment Banking Course covers financial modelling, valuation, M&A, LBO and capital markets, along with practical case studies and interview preparation on applicable plans.