Junior investment banking interviews are relatively standard, with most banks asking a mix of behavioral and theory questions. That said, each firm tends to concentrate on different forms of qualitative and quantitative analysis. Below are questions that have been asked of entry-level investment banking candidates at Royal Bank of Canada, which is one of the many firms that are hiring junior bankers as part of their growth plans. They were collected by students who’ve interviewed there recently.
In fact, Financial News is reporting that RBC is in the process of making another big investment banking push, this time in Europe. The firm’s capital markets team is looking to hire advisors and equity research analysts across healthcare and telecoms, media and technology, as well as other spaces, according to the report. Developing insightful answers to the questions below certainly couldn’t hurt. They were asked of US candidates, but are likely applicable on both sides of the pond.
- What is 21 x 21? Walk me through your thought process.
- EV/EBITDA and EQ Value/Net Income. What is the difference? What does one signify over the other?
- What is your GPA? How did you stand in your class in undergrad? GMAT?
- In a regular market, what is more expensive debt or equity? Explain your thought process.
- Why does a company issue debt over the equity?
- How do you estimate the cost of debt? Cost of equity?
- How do you value a private start-up company?
- What is the difference between trading comparables and precedent transactions?
- What is the advantage of one valuation methodology over the other?
- What is free cash flow?
- Why is free cash flow called “free” cash flow? What does “free” signify?
- How do you perform an LBO?
- Why would someone do an LBO analysis over the DCF?
- What is free cash flow to equity?
- How about free cash flow to the firm?
- What will you do if you don’t do banking this summer?