Technical &Quantitative Interview Questions

Valuing a Company Questions:
What are 3 ways to value a company?
I see you worked for Company X. What valuation methods would you use to value Company X and why?
How would you go about valuing a company whose stock you were considering buying?
What project in a previous job or class involved valuing a company and how did you value that company?
Of the different ways to value a company, which typically gives you the highest
valuation? The lowest?
It’s 10pm and you have a pitch to prepare for morning – what would you do to prepare a valuation for the client company?
How do you value a company with no revenue?
Tell me how you would go about valuing a privately held construction company?
What if there are no publicly traded peers?
What criteria are you using to evaluate the company for which you hope to work?
What are the main issues in valuing a privately held firm?
How would you value a non-U.S. company?
How would you value a company with no earnings such as a start up?
I see you worked for Company X. What valuation methods would you use to value Company X and why? Which companies would you use as comparables and why? What multiples would you use to compare and why?
DCF Questions:
Walk me through a DCF.
How do you compute a terminal value on a DCF?
How do you determine your Free Cash Flows? Why is there a need to calculate it?
Where do you get EBIT?
What is EBIT?
What is EBITDA?
Why is EBITDA a surrogate for operating cash flows?
What is the difference between EBIT and Operating Income?
What is WACC and how do you calculate it? Or In a DCF how do you get to WACC? Or Can you walk me through how you would determine a company’s Weighted Average Cost of Capital (WACC)?
What type of discount rate would I use in valuing the cash flows of a particular company?
How do I arrive at the WACC for a given company?
What is the value ratio?
How do you determine the cost of equity?
How do you determine the cost of debt?
What is beta?
What is CAPM and how do you calculate it?
What beta do you use in CAPM and how do you obtain it?
How do you unlever a Beta? Why do you unlever a beta?
How do you lever a Beta? Why do you lever a beta?
In calculating CAPM, do you use an asset beta or an equity beta?
When do you use an unlevered Beta or a levered Beta?
If you have an asset beta how do you derive your equity beta?
What companies or industries have high Betas?
You are interested in X company, what is its beta and the industry average beta?
What index is used to calculate beta?
How do you calculate an equity beta?
Is beta constant or does it vary over time?
What do you think the beta of General Motors is? What about a high-tech stock such as Cisco Systems?
Which is higher, cost of equity or cost of debt?
What number would you use for the market risk premium?
What number would you use for the risk-free rate?
What is a terminal value and the two ways to calculate the terminal value?
How do you calculate the Gordon Growth Model or Perpetuity Model for the second Terminal Value?
What are some of the advantages and disadvantages of DCF?
What is NOPLAT?
Is a DCF valuation the value of equity or the enterprise value of a company?
Reconcile Free Cash Flow from Net Income?
How do you find diluted shares outstanding?
What is the Treasury Stock Method? When would you use it? How do you calculate it?
How do you get the Enterprise Value (or known as firm value, total capitalization, transaction value, aggregate value, adjusted market value)?
What are some shortcomings of DCF?
Is a DCF valuation the value of equity or the enterprise value of a company?
Reconcile Free Cash Flow from Net Income.
Can you walk me through how you would determine a company’s Weighted Average Cost of Capital (WACC)?
Comparable Questions:
Understand equity and enterprise multiples. Know them backwards and forwards and when you apply them, what companies would use equity multiples vs. enterprise multiples, how it is related to debt, etc.
1. Which are higher? Acquisition comparable multiples or public company comparable multiples? Why?
2. What are the difference between public comparables and acquisition comparables?
3. Why don’t you compare Net Income to Enterprise Value?
4. What is difference between Enterprise Value and Equity Value?
Public or Trading Comparables Questions: 1. Pick a company. What multiples would you use for that company? What if it was a start-up? What if it had high CAPEX that was unusual? 2. What determining factors would you use to find comparable companies for a public comp?
3. How would you do a public comparable?
4. How do you find the appropriate market value for a company?
5. How do you find diluted shares outstanding?
6. What is the Treasury Stock Method? When would you use it? How do you calculate it?
7. You are interested in company X, what multiples would you use to compare it to its peers?
8. How would you find information for a comp?
9. When do you use public vs. acquisition?
10. You said you were interested in health care, what is an average P/E multiple in this area.
Acquistion or Transaction Comparables Questions:
1. What are the key factors in determining your comparable transactions?
2. What is included in the price paid for an acquisition?
3. What is the difference between offer value and equity value?
4. What is the difference between transaction value and enterprise value?
5. How would you determine the deal list for acquisition comps?
6. What are some shortcomings of acquisition comps?
7. What multiples would you use for acquisition comps?
Random Questions:
1111. Company A and B are in the restaurant business. Company A is buying company B. What things would company A want to know?
12. What is an option? You're talking to a CEO about how he could use options. What would you say?
13. How would you value and compare a private all equity company vs. a public company with equity and debt?
14. How do you calculate the cost of debt for a private company?
15. If valuing an all-equity company, how would you calculate the cost of equity?
16. If you were advising a client on an acquisition and your client was willing to pay between $800M - $1B and you knew a PE outfit was about to make a bid for $850M, what would you offer to preempt their bid?
17. If company A owned its stores and company B leased its stores, which would have the higher EBITDA?
18. It’s 10pm and you have a pitch to prepare for morning – what would you do to prepare a valuation for the client company?
19. If a target company has a higher P/E than the acquirer in an all-stock deal, will the acquisition be accretive or dilutive?
20. What are the benefits of pooling versus purchase method in an acquisition?
21. You said you were interested in technology, what's the average debt load for a technology company?
22. What is an LBO and how is it structured?
23. What make a company a good candidate for an LBO?
24. How do you ref out a model? (more geared towards former analysts). When a model blows up, what are the three ways to fix it?
25. In a secondary offering, if you could only choose one method of valuation, which one would you use? Why?
26. What is operating leverage?
27. Tell me how you have modeled with equations in the past?
28. Do you have an analytical mind? Show me.
29. What are the benefits of pooling versus purchase method in an acquisition?
30. Here’s a whiteboard. Stand in front of it and present a chapter from your favorite finance textbook. You have five minutes.
31. Do you know the relationship between the price and yield on the bond?
32. How you developed your core finance skills (analytical ability, good communication skills, strong work ethic)?
33. What is an option? You're talking to a CEO about how he could use options. What would you say?
34. Tell me about the stock a stock that you follow? (what are we suppose to say)
35. What does liquidity allow an investor?
36. If you worked for the finance division of our company, how would you decide whether or not to invest in a project?
37. Why might a technology company be more highly valued in the market in terms of P/E than a steel company?
38. When should a company raise money via equity?
39. When should a company raise funds using debt?
40. How would one price the different elements of a convertible bond? (not as likely of a question)
41. Your client wants to buy one of two banks. One is trading at 12xP/E and the other trades at a 16xP/E. Which should your client try to buy? Do you even have enough information to determine this?
42. What are some ways to determine if a company might be a credit risk?
43. How does compounding work? Would I be better off with 10% annually, semi-annually or daily?
44. For a bond, what is duration? Why is duration important?
45. What is the difference between preferred stock and regular stock?
46. How can a company raise its stock price?
47. What is a leveraged buyout? Why lever up?
48. Your boss uses the DCF model for high growth company with low earnings. What do you think of this strategy?
49. Can I apply CAPM in Latin America markets?
50. How do you value a company with NOLS (Net Operating Losses)?
51. Why would a company do a share repurchase or buyback?
52. What are the pros and cons of a company going public?
53. Why would a company decide to issue a convertible bond or equity or debt?
Math Questions:
Find a way to break down each question instead of doing long calculations.
1. Brain Teaser: Say you are driving 2 miles on a 1-mile track. You do one lap at 30 miles per hour. How fast do you need to go to average 60 miles an hour.
2. Give me the sum of all the numbers between 1 and 100.
3. You have a painting that is $320 that is selling for 20 percent off. Howmuch is the discounted price?
4. What is 4 cubed?
5. What is 6 cubed?
6. What is 7 cubed?
7. What is 8 cubed?
8. What is 9 cubed?
9. What is 2/3 + 3/4?
10. What is 1% of one million?
11. What is 10,000 x 10,000?
12. What is larger 3^4 or 4^3?
13. What is larger 3^5 or 4^4?
14. What is 100*100?
15. What is 10,000/8?
16. What is 40% of 1250?
17. What is 3/16 in a decimal?
18. What is 7/16 in a decimal