Investment Banking Practice Questions
and Answers Latest Version (2024/2025)
Already Passed
What is the primary function of an investment bank?
✔✔The primary function of an investment bank is to help companies raise capital by issuing
stocks and bonds, provide financial advisory services, and facilitate mergers and acquisitions.
What is the difference between equity financing and debt financing in investment banking?
✔✔Equity financing involves raising capital by selling shares of stock, while debt financing
involves borrowing money that must be repaid with interest.
What is a primary market in investment banking?
✔✔A primary market is where new securities are issued and sold for the first time, typically
through an Initial Public Offering (IPO).
What is an Initial Public Offering (IPO)?
✔✔An IPO is the process by which a private company offers shares to the public for the first
time, allowing the company to raise capital from a broad group of investors.
1
,What is the role of an underwriter in an IPO?
✔✔An underwriter helps the company determine the offering price of the IPO, purchases the
shares from the company, and resells them to the public, often taking on the risk of selling the
shares.
What does the term "due diligence" mean in investment banking?
✔✔Due diligence refers to the comprehensive investigation and analysis conducted by
investment banks to assess a company’s financial health, risks, and prospects before facilitating a
deal or transaction.
What is the difference between a merger and an acquisition?
✔✔A merger involves two companies combining to form a new entity, while an acquisition is
when one company buys another company and absorbs it into its operations.
What is a leveraged buyout (LBO)?
✔✔A leveraged buyout is a financial transaction where a company is purchased using a
significant amount of borrowed money, which is often secured against the assets of the company
being acquired.
2
, What is the purpose of a pitch book in investment banking?
✔✔A pitch book is a presentation used by investment bankers to pitch investment opportunities
or strategies to potential clients, typically containing market analysis, deal structures, and
financial projections.
What is a sell-side analyst's role in investment banking?
✔✔A sell-side analyst provides research, analysis, and recommendations on stocks and
securities for clients of the investment bank who are selling securities, usually institutional
investors.
What is the role of a buy-side analyst in investment banking?
✔✔A buy-side analyst works for institutional investors and helps them make decisions about
buying securities, providing research and recommendations on investment opportunities.
What is an offering memorandum (OM) in investment banking?
✔✔An offering memorandum is a document that provides detailed information about a financial
offering, such as a private placement or bond issue, to potential investors.
What is the difference between a public offering and a private placement?
3
and Answers Latest Version (2024/2025)
Already Passed
What is the primary function of an investment bank?
✔✔The primary function of an investment bank is to help companies raise capital by issuing
stocks and bonds, provide financial advisory services, and facilitate mergers and acquisitions.
What is the difference between equity financing and debt financing in investment banking?
✔✔Equity financing involves raising capital by selling shares of stock, while debt financing
involves borrowing money that must be repaid with interest.
What is a primary market in investment banking?
✔✔A primary market is where new securities are issued and sold for the first time, typically
through an Initial Public Offering (IPO).
What is an Initial Public Offering (IPO)?
✔✔An IPO is the process by which a private company offers shares to the public for the first
time, allowing the company to raise capital from a broad group of investors.
1
,What is the role of an underwriter in an IPO?
✔✔An underwriter helps the company determine the offering price of the IPO, purchases the
shares from the company, and resells them to the public, often taking on the risk of selling the
shares.
What does the term "due diligence" mean in investment banking?
✔✔Due diligence refers to the comprehensive investigation and analysis conducted by
investment banks to assess a company’s financial health, risks, and prospects before facilitating a
deal or transaction.
What is the difference between a merger and an acquisition?
✔✔A merger involves two companies combining to form a new entity, while an acquisition is
when one company buys another company and absorbs it into its operations.
What is a leveraged buyout (LBO)?
✔✔A leveraged buyout is a financial transaction where a company is purchased using a
significant amount of borrowed money, which is often secured against the assets of the company
being acquired.
2
, What is the purpose of a pitch book in investment banking?
✔✔A pitch book is a presentation used by investment bankers to pitch investment opportunities
or strategies to potential clients, typically containing market analysis, deal structures, and
financial projections.
What is a sell-side analyst's role in investment banking?
✔✔A sell-side analyst provides research, analysis, and recommendations on stocks and
securities for clients of the investment bank who are selling securities, usually institutional
investors.
What is the role of a buy-side analyst in investment banking?
✔✔A buy-side analyst works for institutional investors and helps them make decisions about
buying securities, providing research and recommendations on investment opportunities.
What is an offering memorandum (OM) in investment banking?
✔✔An offering memorandum is a document that provides detailed information about a financial
offering, such as a private placement or bond issue, to potential investors.
What is the difference between a public offering and a private placement?
3
