The Complete Guide to Investment Banking Technical Interviews
Technical interviews separate prepared candidates from everyone else. This guide covers everything you'll face in IB technical interviews.
The Complete Guide to Investment Banking Technical Interviews
Goldman Sachs doesn't hire the smartest candidates. They hire the most prepared ones.
Technical interviews separate prepared candidates from everyone else. You can't charm your way through a DCF question. You either know the mechanics or you don't.
This guide covers everything you'll face in IB technical interviews. We'll break down the question categories, explain what interviewers actually want to hear, and give you frameworks that work under pressure.
What Technical Interviews Actually Test
Technical interviews don't test whether you can do the job. First-year analysts learn most skills on the desk. The interviews test something else entirely.
They test three things:
Preparation intensity. Did you care enough to learn this material? Banks want people who prepare obsessively. The technicals are a proxy for work ethic.
Communication under pressure. Can you explain complex concepts clearly when stressed? This matters because you'll present to clients who don't have finance backgrounds.
Baseline aptitude. Do you understand how businesses work? Can you think logically about financial problems? Some pattern recognition is required.
The bar isn't genius-level understanding. The bar is solid fundamentals delivered confidently.
The Five Question Categories
Every IB technical interview draws from five categories. Master these and you'll handle 90% of what interviewers throw at you.
1. Accounting Questions
Accounting is the language of business. Interviewers expect fluency.
Common questions include:
- Walk me through the three financial statements
- How does depreciation flow through the statements?
- What happens when inventory increases by $10?
- How do you calculate working capital?
- What's the difference between cash and accrual accounting?
What interviewers want: Precision. These questions have correct answers. Hesitation or vagueness signals you haven't put in the work.
How to prepare: Memorize the mechanics. Practice until the answers are automatic. You should be able to explain depreciation's impact on all three statements without thinking.
2. Valuation Questions
Valuation is why investment banks exist. You must understand how to value companies.
The three core methodologies:
Comparable Company Analysis (Comps). Value a company based on how similar public companies trade. Key multiples: EV/EBITDA, EV/Revenue, P/E.
Precedent Transactions. Value a company based on what acquirers paid for similar companies. Usually yields higher values than comps because of control premiums.
Discounted Cash Flow (DCF). Value a company based on its projected future cash flows, discounted back to present value. Most theoretically correct but most sensitive to assumptions.
Common questions include:
- Walk me through a DCF
- When would you use each valuation methodology?
- What's the difference between enterprise value and equity value?
- A company has negative EBITDA—how do you value it?
- Why might comps and DCF give different values?
What interviewers want: Understanding of when to use each method and awareness of limitations. No methodology is perfect. Acknowledge trade-offs.
How to prepare: Know the DCF cold. Practice the walk-through until it takes exactly 60 seconds. Understand the bridge from equity value to enterprise value—this trips up most candidates.
3. M&A Questions
Investment banks advise on mergers and acquisitions. You need to understand deal mechanics.
Key concepts:
Accretion/Dilution. Does the deal increase or decrease the acquirer's earnings per share? This determines whether a deal is "accretive" or "dilutive."
Synergies. Cost savings or revenue increases from combining two companies. Synergies justify paying premiums.
Deal structures. Cash vs. stock vs. mixed consideration. Each has different implications for buyers and sellers.
Common questions include:
- Is this deal accretive or dilutive?
- What are sources and uses in an M&A deal?
- Why would a company prefer to pay with stock vs. cash?
- Walk me through a merger model
- How do you calculate the control premium?
What interviewers want: Logical thinking about deal dynamics. Who benefits? Who loses? What are the trade-offs?
How to prepare: Understand the accretion/dilution math. Know why deals happen (synergies, strategic rationale, financial engineering). Practice merger model mechanics.
4. LBO Questions
Leveraged buyouts are how private equity firms acquire companies. Banks finance these deals and need analysts who understand them.
The core concept: Buy a company using mostly debt. Use the company's cash flows to pay down debt. Sell the company later at a higher value. The equity return comes from leverage and operational improvements.
Key mechanics:
Sources and uses. Where does the money come from? Where does it go?
Debt paydown. How quickly can the company reduce its debt burden?
Returns. IRR (internal rate of return) and MOIC (multiple on invested capital) measure success.
Common questions include:
- Walk me through a paper LBO
- What makes a good LBO candidate?
- How does leverage affect returns?
- What's the difference between IRR and MOIC?
- How do you increase returns in an LBO?
What interviewers want: Understanding of how leverage amplifies returns (and risks). Awareness of what makes companies attractive to PE buyers.
How to prepare: Master the paper LBO. You should be able to calculate IRR and MOIC in your head for simple scenarios. Know the characteristics of good LBO targets (stable cash flows, low capex, cost reduction opportunities).
5. Brain Teasers and Market Questions
Some interviewers test quick thinking with puzzles or market questions.
Brain teasers might include:
- How many golf balls fit in a school bus?
- What's the market size for dog food in the US?
- You have 8 balls, one is heavier—how do you find it with a balance scale in 2 weighings?
Market questions might include:
- Where is the 10-year Treasury trading?
- What happened to markets yesterday?
- Pick a stock and pitch it to me
What interviewers want: Structured thinking and composure. They care about your process, not the exact answer.
How to prepare: Practice estimation problems. Follow markets daily—know where major indices and rates stand. Have 2-3 stock pitches ready.
The Enterprise Value Bridge
This concept deserves its own section. It trips up more candidates than anything else.
Equity value is what shareholders own. Market cap equals equity value for public companies.
Enterprise value is what the whole business is worth, regardless of how it's financed. It's the theoretical takeover price.
The bridge:
Enterprise Value = Equity Value + Debt + Preferred Stock + Minority Interest - Cash
Why add debt? Because an acquirer assumes the debt. The true cost includes paying off creditors.
Why subtract cash? Because an acquirer gets the cash. It reduces the effective price.
Common interview trap: "If a company has $100M equity value and $50M cash, what's its enterprise value?"
Wrong answer: $150M.
Right answer: You can't calculate enterprise value without knowing the debt. The question is incomplete. Say so.
The 60-Second DCF Walk-Through
Interviewers love this question. Your answer should take 60 seconds, not 10 minutes.
Here's the framework:
"A DCF values a company based on its projected future cash flows, discounted back to present value.
First, you project the company's free cash flows for 5-10 years. Free cash flow is operating cash flow minus capital expenditures.
Second, you calculate a terminal value to capture the value beyond the projection period. You can use either a perpetuity growth method or an exit multiple.
Third, you discount these cash flows back to present value using WACC—the weighted average cost of capital.
Finally, you sum the present value of the projected cash flows and the terminal value to get enterprise value. Subtract net debt to get equity value."
Practice this until it's automatic. Time yourself. Stay under 90 seconds.
Common Mistakes That Kill Interviews
Rambling answers. State your answer first, then explain. "The answer is X. Here's why..." Interviewers lose patience with candidates who circle before landing.
Guessing under pressure. If you don't know something, say so. "I'm not sure, but here's how I'd think about it..." is better than confidently stating something wrong.
Forgetting the basics. Candidates study advanced topics and forget fundamentals. Know your accounting cold before touching LBO mechanics.
Robotic delivery. Memorized answers sound memorized. Understand concepts well enough to explain them conversationally.
Not asking clarifying questions. Some questions are intentionally vague. "Can you tell me more about the company's capital structure?" shows sophistication.
How to Prepare: A Realistic Timeline
8 weeks out: Start with accounting. Master the three statements and how they connect. Spend 1-2 hours daily.
6 weeks out: Move to valuation. Understand all three methodologies. Practice DCF walk-throughs. Build a simple DCF in Excel.
4 weeks out: Add M&A and LBO concepts. Learn accretion/dilution mechanics. Master the paper LBO.
2 weeks out: Start mock interviews. Practice with friends or use online services. Get comfortable answering questions aloud.
1 week out: Review everything. Focus on weak spots. Start following markets closely.
Day before: Light review only. Get sleep. Confidence matters as much as knowledge.
Resources That Actually Help
For accounting: Read the first 100 pages of any financial accounting textbook. Do practice problems until journal entries feel intuitive.
For valuation: Rosenbaum and Pearl's Investment Banking is the standard. Chapters on valuation are essential.
For modeling: Build models yourself. Downloading templates teaches nothing. The learning happens when you struggle.
For practice questions: WSO technical guides cover most common questions. Do them all, multiple times.
For mock interviews: Record yourself answering questions. You'll hate watching it. That's the point. You'll improve faster.
What Separates Good From Great
Good candidates answer questions correctly. Great candidates do something more.
They explain why things work the way they do. They acknowledge limitations. They connect concepts to real situations.
When asked about DCF limitations, a good candidate lists them. A great candidate adds: "That's why we use multiple methodologies—no single approach captures everything."
When asked about accretion/dilution, a good candidate explains the math. A great candidate adds: "But EPS accretion doesn't necessarily mean the deal creates value. You need to look at what you're paying relative to the target's standalone value."
This depth comes from genuine understanding, not memorization. It's the difference between learning what and learning why.
The Bottom Line
Technical interviews are learnable. The material is finite. The questions repeat.
Preparation beats intelligence. Candidates who study for 200 hours outperform naturally talented candidates who study for 50.
Start early. Be systematic. Practice until answers feel automatic.
Then walk in and show them what prepared looks like.