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MBA Guide to Conquering Finance Interviews

By Ryan Allen,2014-08-08 03:33
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MBA Guide to Conquering Finance Interviews

    MBA Guide to Conquering Finance Interviews

Behavioral Interviewing:

    The premise behind behavioral interviewing is that the most accurate predictor of future performance is past performance in similar situations. Behavioral interviewing, in fact, is said to be 55 percent predictive of future on-the-job behavior, while traditional interviewing is only 10 percent predictive. Employers use the behavioral interview technique to evaluate a candidate’s experiences and behaviors so they can determine the applicant’s potential for success. The interviewer identifies job-related experiences, behaviors, knowledge, skills and abilities that the company has decided are desirable in a particular position. In the interview, your response needs to be specific and detailed. Ideally, you should briefly describe the situation, what specific action you took to have an effect on the situation and the positive result or outcome. Frame it in a three-step process, called a S-T-A-R statement:

    Describe the situation that you were in or the task that you needed to accomplish. You Situation or Task

    must describe a specific event or situation, not a generalized description of what you have

    done in the past. Be sure to give enough detail for the interviewer to understand. This

    situation can be from a previous job, from a volunteer experience, or any relevant event.

    Describe the action you took and be sure to keep the focus on you. Even if you are Action you took

    discussing a group project or effort, describe what you did -- not the efforts of the team.

    Don't tell what you might do, tell what you did.

    What happened? How did the event end? What did you accomplish? What did you learn? Results you achieved

Finance Case/ Technical Interviews:

    Finance Case/ Technical interviews are used to assess the analytical, financial skills as well as accounting knowledge of a candidate. Recruiters are assessing the way candidates understand financial concepts such as how to value a company and how to make sound investment decisions using discounted cash flow and other financial analysis. They also want to see how you react, think on your feet and respond under pressure. To do well in technical interviews, you must master your knowledge in accounting and finance. Practice calculating complex finance questions under pressure and know how a balance sheet, income statement and cash flow statement are related. Remember: Practice makes perfect!

Questions from Recent On-Campus Interviews at McCombs

Behavioral:

    ; Why do you want to do Finance? (All)

    - Say how your experiences prepared you for the job.

    ; Walk me through your resume. (All)

    - Things you are proud off (you feel energized about),

    - Things that distinguish you

    - Things most applicable to the core finance skills.

    ; Let me give you an example: It is Friday afternoon, you have a wedding set for Saturday and you have

    told everybody in the office you will be gone. Just when you are about to leave, you find out that the

    client wants to meet with your team tomorrow. What will you do? (Bulge Bracket Firms)

    - This is a work attitude question.

    ; Why should we hire you? (All)

    - With any open-ended question, make your response insightful and entertaining. Think of these

    questions as speeches. Give stories and anecdotes, something so they can remember you for,

    something unique.

    ; What types of activities did you pursue while in college? (Lehman Brothers)

    - You are interviewing for intense, stressful positions. Banks love to see A personalities who

    worked, went to school, got As and don’t seem to need sleep.

    ; Why are you applying to this firm? (All)

    - Get ready to talk about the industry and the firm specifically. This is especially important

    question for smaller firms.

    ; Give me an example of a project that you did that involved heavy analytical thinking. (CSFB)

    - If you don’t have financial background, give example of a work or school project, focusing on the

    part that required a lot of number crunching

    ; Give me an example of a time you worked as a part of a team: (All)

    - You will DEFINITELY get this one. Highlight your strengths as a team member: empathy,

    collaboration, consensus building…

    ; What is the most striking thing you’ve read recently in The Wall Street Journal (or what Publications do

    you read regularly)? (Merrill Lynch)

    - This is probing how well read you are and how well you can describe any recent financial issues.

    Read WSJ regularly, especially when it is close to the interview time. We suggest start with 45

    min a day and gradually bringing it down as you become more efficient.

    ; Describe a project you have worked on that you enjoyed. (All)

    - Show you are hardworking, responsible, analytical team player.

    ; Let’s say I give you this job today. Now let’s move to the future and say in six month into the job you are

    fired. Give me three reasons why this could happen, and what you can do to prevent this (or give me 3

    weaknesses)? (Bear Stearns)

    - Don’t loose your cool and have answers prepared for the weakness question.

    ; Think of a person that knows you very well both professionally and socially. If I were to call this person

    and ask him to describe you, what would he say? (Banc of America)

    - Talk about your strengths and weaknesses.

    ; Can you give me an example of an experience with failure? (Merrill Lynch)

    - Have an answer prepared for this question. Be modest and admit that you have experienced

    setbacks. Also, focus on how you bounced back and learned from that experience ; You don’t seem like you are a very driven person. How will you be able to handle a job in banking? (All)

    - A stressful question: for instance you may meet with more than a dozen people in a day when

    interviewing for Goldman. It is easy to appear worn out, when you are trying to convince them

    you don’t wear out easily. Give a good example when you were totally driven.

    ; Tell me about an accomplishment you are proud off: (All)

    - This is you chance to shine. Remember: teamwork, analytic ability, hardworking, dependable.

    Case (Technical):

    INVESTMENT BANKING

    VALUATION

    ; Tell me the different ways you can value a company. (All)

    ******** YOU NEED TO KNOW THIS INSIDE AND OUT********

    ; Discounted Cash Flow Analysis

    ; Adjusted Present Value

    ; Market comparables

    o Price to earnings (P/E), Enterprise value/Revenue, Price to book value

    ; Comparable acquisitions

    ; Be able to talk comfortably about the following: (All)

    o Levering and delevering betas

    o How to find a WACC

    o Capital Asset Pricing Model

    o Five factors that affect options pricing

    o Terminal values

    o What makes a good comparable company

    ; What ratios do you think are most important when valuing a company and why? (CSFB)

; Walk me through a valuation you have done (all encompassing question). (All)

    GENERAL QUESTIONS

    ; What types of industries have you followed and give me your opinion on a particular industry and why

    companies have succeeded or failed in this industry. (Bear Stearns)

    ; Know how the three basic financial statements flow together. Cash Flow Statement, Balance Sheet,

    Income Statement (CSFB)

    ; Let’s talk about ______ merger. What do you think about it? (UBS)

    ADVANCED QUESTIONS

    ; Walk me through the IPO process (RBC Capital Markets)

    ; When raising equity, what are important factors you should consider before the public offering? (RBC

    Capital Markets)

    ; Discuss the types of capital sources and when each is appropriate: (All)

    ; Debt, Equity, Preferred stock, Convertible debt

    HELPFUL HINTS

    ; Interview with many banks; it’s a numbers game

    ; Know strengths/weaknesses of the firm very well

    ; Know the latest news regarding the firm with which you are interviewing

    ; Know high profile deals the bank may have completed

    ; HAVE A GREAT STORY

    o Show how decisions and past experiences have positioned you to be an investment banker

    o Show how going to UT directly fits in these plans

    o Try to stress your “uniqueness” and show how this will add to the bank (They like interesting

    people with interesting stories!!)

    ; Have insightful, intelligent questions

    ; Let them know that you know about the lifestyle and that you are comfortable with it

    ; Don’t dare ask about compensation

    INVESTMENT MANAGEMENT/ RESEARCH

    VALUATION: See I-Banking Questions

    PERSONAL AND FIRM SPECIFIC QUESTIONS

    ; Why investment research? Why do you want to be on the buy/sell side? (UTIMCO)

    ; Why did you go to the University of Texas if you want to do investment research? (All)

    ; What other firms are you talking to? (Goldman Sachs)

    ; Compare and contrast the firms you are talking to and why you like our firm better. (Morgan Stanley)

    ; Why do you see yourself as a good fit with your firm? (All)

    ; Where do you see the industry going (e.g., Reg. FD)? (All)

    ; In your opinion, what makes a good equity analyst/research associate? (UTIMCO)

    ; Do you have specific industry interests? (All)

    ACCOUNTING & F/S ANALYSIS RELATED QUESTIONS

    ; Describe how the three main financial statements flow together. (All)

    ; Mini-case question: “There are three ways to account for oil exploration costs: The FIRST is to

    write-off all exploration costs as incurred, the SECOND is to capitalize successful explorations and

    write off the rest, and the THIRD is to capitalize all exploration costs. Which one results in the

    lowest Net Income, the highest Book Value, and the highest Cash Flow?” (UTIMCO)

    ; Larger case question: After being presented a set of financial statements you are asked what you

    would look at (in the f/s) and what other information you would acquire in determining if you would

    purchase the stock. Would you buy? (UTIMCO)

    ; Describe two ways to estimate Free Cash Flows? (All)

    ; What can you tell about a company’s ROE if you are willing to pay an amount equal to its book

    value per share for a share of stock? (All)

SECURITY ANALYSIS

    ; Do you invest in stocks personally? (Morgan Stanley)

    ; What stocks do you like? Why? (This is basically a stock pitch. Be ready to talk about three stocks

    in detail. Know financial information, ratios, multiples, the company’s prospects, etc. HINT:

    consider giving the Investor Relations office (of the stocks you are pitching) a call as part of your

    preparation. Asking the company questions shows that you have really done some homework).

    ; Tell me about what you consider your best investment success? Biggest failure? What did you

    learn? (All)

SELL-SIDE RELATED QUESTION

    ; You are a research associate: you get into the office at 9AM, a stock (XYZ) you have a “strong buy”

    rating on has gone down 30% in the last 30 minutes, the analyst you work for is currently on an

    airplane and not reachable, you have four calls on hold: 1) the CFO of the XYZ, 2) one of your

    biggest institutional clients, 3) the head trader at your firm, and 4) the director of research. In what

    order do you answer the calls and why? (UTIMCO)

    ; You get into the office in the morning and there is a note from the analyst you work for. She will be

    in the office in 5 hours and would like to see an analysis of a particular stock. What do you do to

    analyze the stock and what do you present to the analyst. (UTIMCO)

    ; What is a research associate’s number one role? (All)

    HELPFUL HINTS

    ; Display that you have a plan that has always included equity research as your end objective.

    o Show how decisions and past experiences have positioned you to be an equity analyst.

    o Show how going to UT directly fits in these plans.

    o HINT: Enrolling in the CFA program can help with this.

    ; Know what the firm’s investment philosophy is (i.e., momentum, top-down growth, bottom-up value,

    etc) and be able to talk about it.

    ; Know strengths/weaknesses of the firm very well.

    ; Know the latest news regarding the firm with which you are interviewing.

    ; Look for any news the firm has been involved in.

    ; Know their largest holdings (if possible).

    ; Know the difference between the buy-side and the sell-side. Also, know how buy-side analysts

    interact with portfolio managers and how sell-side research associates interact with investment

    bankers.

    ENERGY FINANCE

    Interviews with Energy companies tend to be a little more technical than typical corporate finance interviews. Behavioral

    The behavioral are like most other interviews

    ; tell me a time when you used a creative solution

    ; tell me a time when you took a stand and others disagreed

    ; tell me a time when you failed

    ; For energy finance you often get asked, tell me a time when you applied quantitative analysis to a problem Technical

    On the technical side, it depends on the type of job hiring in to. Some broad programs will just want you to explain:

    ; why you want to work for that company and what you could contribute. This is not highly technical but it

    requires you to understand the industry and what the company does -- not always easy for energy finance.

    Enron loves to ask what you think that they do. (All)

    ; You will need to throw in some techniques (valuation analysis, risk techniques, options stuff) as to how you

    can contribute. Some (like Enron) will be much more straight textbook finance.

    ; How do you value an asset? (Merrill Lynch)

    ; What are the factors that effect the value of an option? (ExxonMobil)

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