Investment Banking 400 Basic Technical Questions Practice Guide 2026-04-10 Investment Banking 400 Basic Technical Questions Practice Guide.pdf
Investment Banking 400
Basic Technical Questions
Practice Guide
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Terms in this set (123)
5 most important accounting concepts you need to know
1. The 3 financial statements and what each one means
2. How the 3 statements link together and how to walk through questions
where one or multiple items change
3. Different methods of accounting - cash-based vs. accrual, and determining
when revenue and expenses are recognized
4. When to expense something and when to capitalize it. Not all expenses are
created equal
5. What individual items on the statements, like Goodwill, Other Intangibles and
Shareholders' Equity, actually mean.
3 Page 3 of 34 Page 3
, Investment Banking 400 Qs - basics only 2026-04-10 Investment Banking 400 Qs - basics only.pdf
1. Walk me through the 3 financial statements.
The 3 major financial statements are the Income Statement, Balance Sheet
and Cash Flow Statement.
The Income statement gives the company's revenue and expenses, and goes
down to Net Income, the final line of the statement.
The Balance Sheet shows the company's assets - its resources - such as
Cash, Inventory, PP&E, as well as Liabilities such as Debt and Accounts
Payable, and Shareholder's Equity. Assets must equal Liabilities plus
Shareholders' Equity.
Lastly, Cash Flow Statement begins with its Net Income, adjusts for non-cash
expenses and working capital changes, and then lists cash flow from investing
and financing activities, at the end, you see the company's net change in cash.
2. Can you give examples of major line items on each of the financial
statements?
Income Statement has Revenue; Cost of Goods Sold; SG&A (Selling, General,
and Administrative Expenses); Operating Income; Pretax Income; Net Income
Balance Sheet has Cash; Accounts Receivable; Inventory; Plants, Property,
and Equipment; Account Payable; Accrued Expenses; Debt; Shareholders'
Equity
Cash Flow Statement has Net Income; Depreciation & Amortization; Stock-
Based Compensation; Changes in Operating Assets and Liabilities; Cash Flow
From Operations; Capital Expenditures; Cash Flow From Investing;
Sale/Purchase of Securities; Dividend Issued; Cash Flow From Financing
3. How do the 3 statements link together
To tie the statements together, Net Income from the Income statement flows
into Shareholders' Equity on the balance sheet, and into the top line of the
Cash Flow Statement.
Changes to Balance Sheet items appear as working capital changes on the
Cash Flow statement, and investing and financing activities affect Balance
Sheet items such as PP&E, Debt, and Shareholders' Equity. The Cash and
Shareholders' Equity items on the Balance Sheet act as "plugs", with Cash
flowing in from the final line of the cash flow statement.
4. If I were stranded on a desert island, only had 1 statement and I wanted to
review the overall health of a company - which statement would I use and why?
It would be the Cash Flow Statement. It's because the Cash Flow Statement
shows the overall and a true picture of how much cash the company is actually
generating, independent of all the non-cash expenses you might have. And that
is the #1 thing you care about when analyzing the overall financial health of
any business - its cash flow.
4 Page 4 of 34 Page 4
Investment Banking 400
Basic Technical Questions
Practice Guide
1 Guidehttps://www.stuvia.com/dashboard!@_)#*)(@$)($@*($@)($@*_
Page 1 of 34 Page 1
,Investment Banking 400 Qs - basics only 2026-04-10 Investment Banking 400 Qs - basics only.pdf
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,Investment Banking 400 Qs - basics only 2026-04-10 Investment Banking 400 Qs - basics only.pdf
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Terms in this set (123)
5 most important accounting concepts you need to know
1. The 3 financial statements and what each one means
2. How the 3 statements link together and how to walk through questions
where one or multiple items change
3. Different methods of accounting - cash-based vs. accrual, and determining
when revenue and expenses are recognized
4. When to expense something and when to capitalize it. Not all expenses are
created equal
5. What individual items on the statements, like Goodwill, Other Intangibles and
Shareholders' Equity, actually mean.
3 Page 3 of 34 Page 3
, Investment Banking 400 Qs - basics only 2026-04-10 Investment Banking 400 Qs - basics only.pdf
1. Walk me through the 3 financial statements.
The 3 major financial statements are the Income Statement, Balance Sheet
and Cash Flow Statement.
The Income statement gives the company's revenue and expenses, and goes
down to Net Income, the final line of the statement.
The Balance Sheet shows the company's assets - its resources - such as
Cash, Inventory, PP&E, as well as Liabilities such as Debt and Accounts
Payable, and Shareholder's Equity. Assets must equal Liabilities plus
Shareholders' Equity.
Lastly, Cash Flow Statement begins with its Net Income, adjusts for non-cash
expenses and working capital changes, and then lists cash flow from investing
and financing activities, at the end, you see the company's net change in cash.
2. Can you give examples of major line items on each of the financial
statements?
Income Statement has Revenue; Cost of Goods Sold; SG&A (Selling, General,
and Administrative Expenses); Operating Income; Pretax Income; Net Income
Balance Sheet has Cash; Accounts Receivable; Inventory; Plants, Property,
and Equipment; Account Payable; Accrued Expenses; Debt; Shareholders'
Equity
Cash Flow Statement has Net Income; Depreciation & Amortization; Stock-
Based Compensation; Changes in Operating Assets and Liabilities; Cash Flow
From Operations; Capital Expenditures; Cash Flow From Investing;
Sale/Purchase of Securities; Dividend Issued; Cash Flow From Financing
3. How do the 3 statements link together
To tie the statements together, Net Income from the Income statement flows
into Shareholders' Equity on the balance sheet, and into the top line of the
Cash Flow Statement.
Changes to Balance Sheet items appear as working capital changes on the
Cash Flow statement, and investing and financing activities affect Balance
Sheet items such as PP&E, Debt, and Shareholders' Equity. The Cash and
Shareholders' Equity items on the Balance Sheet act as "plugs", with Cash
flowing in from the final line of the cash flow statement.
4. If I were stranded on a desert island, only had 1 statement and I wanted to
review the overall health of a company - which statement would I use and why?
It would be the Cash Flow Statement. It's because the Cash Flow Statement
shows the overall and a true picture of how much cash the company is actually
generating, independent of all the non-cash expenses you might have. And that
is the #1 thing you care about when analyzing the overall financial health of
any business - its cash flow.
4 Page 4 of 34 Page 4
