Wall Street Prep Exam Questions and
Answers14
When should you value a company using a revenue multiple vs. EBITDA? - ANSWERS-Companies
with negative profits and EBITDA will have meaningless EBITDA multiples. As a result, Revenue
multiples are more insightful.
Two companies are identical in earnings, growth prospects, leverage, returns on capital, and
risk. Company A is trading at a 15 P/E multiple, while the other trades at 10 P/E. which would
you prefer as an investment? - ANSWERS-10 P/E: A rational investor would rather pay less per
unit of ownership.
Addressing a low GPA - ANSWERS-"Frankly, I made some bad decisions as a freshman which I
have been able to partially reverse through a lot of hard work over the last few years. My very
1st semester at Notre Dame I did not manage my time well between extracurricular activities
and academics and received a 1.8. After reflecting on my poor performance that semester, I
realized that I needed to get my priorities in order and started to focus more of my energy on
my academics. Excluding that first semester, my GPA would have been 3.5. In fact, I have
continued to improve every year and over the last year I have maintained a 3.8 GPA."
how comfortable do you feel working with numbers? - ANSWERS-"Even though my university
doesn't offer any finance or accounting courses, I have taken numerous calculus, statistics,
physics, and computer science courses to help me develop strong problem solving skills. In
addition, as a member of the Rock Climbing Club, I work on budgeting and have budgeted the
next 3 climbing trips to the dollar using a simple excel model that I created from scratch. I
recognize that the position I am interviewing for is an analytical position, that is very much part
of the appeal. I love analytical challenges and feel confident that I can handle the analytical rigor
of investment banking."
Telling a strategic anecdote in an investment banking interview (leadership anecdote) -
ANSWERS-Great responses to this question include ones that clearly depict you as a leader
, without sounding arrogant. You want to give responses like "took initiative to go to each dorm
and market the event to dorm reps and bargained with vendors to get prices for food and drink
- reducing original prices by 15%. The aggressive marketing coupled with reduction in prices
allowed us to raise approximately $12,000 in funds for my class."
Assets - ANSWERS-resources a company uses to operate its business
includes cash, A/R, PP&E
Liabilities - ANSWERS-represents the company's contractual obligations and includes A/P, debt,
accrued expenses
Shareholder's equity - ANSWERS-is the residual
the value of the business available to the owners (shareholders) after debts have been paid off
Income statement - ANSWERS-illustrates the profitability of the company over a specified period
of time
broad sense: shows revenue-expenses
Balance sheet - ANSWERS-snapshot of the company economic resources and funding for those
resources at a given point in time (A = L + SE)
Revenue - ANSWERS-"top-line"
represents the sale of goods and services
Answers14
When should you value a company using a revenue multiple vs. EBITDA? - ANSWERS-Companies
with negative profits and EBITDA will have meaningless EBITDA multiples. As a result, Revenue
multiples are more insightful.
Two companies are identical in earnings, growth prospects, leverage, returns on capital, and
risk. Company A is trading at a 15 P/E multiple, while the other trades at 10 P/E. which would
you prefer as an investment? - ANSWERS-10 P/E: A rational investor would rather pay less per
unit of ownership.
Addressing a low GPA - ANSWERS-"Frankly, I made some bad decisions as a freshman which I
have been able to partially reverse through a lot of hard work over the last few years. My very
1st semester at Notre Dame I did not manage my time well between extracurricular activities
and academics and received a 1.8. After reflecting on my poor performance that semester, I
realized that I needed to get my priorities in order and started to focus more of my energy on
my academics. Excluding that first semester, my GPA would have been 3.5. In fact, I have
continued to improve every year and over the last year I have maintained a 3.8 GPA."
how comfortable do you feel working with numbers? - ANSWERS-"Even though my university
doesn't offer any finance or accounting courses, I have taken numerous calculus, statistics,
physics, and computer science courses to help me develop strong problem solving skills. In
addition, as a member of the Rock Climbing Club, I work on budgeting and have budgeted the
next 3 climbing trips to the dollar using a simple excel model that I created from scratch. I
recognize that the position I am interviewing for is an analytical position, that is very much part
of the appeal. I love analytical challenges and feel confident that I can handle the analytical rigor
of investment banking."
Telling a strategic anecdote in an investment banking interview (leadership anecdote) -
ANSWERS-Great responses to this question include ones that clearly depict you as a leader
, without sounding arrogant. You want to give responses like "took initiative to go to each dorm
and market the event to dorm reps and bargained with vendors to get prices for food and drink
- reducing original prices by 15%. The aggressive marketing coupled with reduction in prices
allowed us to raise approximately $12,000 in funds for my class."
Assets - ANSWERS-resources a company uses to operate its business
includes cash, A/R, PP&E
Liabilities - ANSWERS-represents the company's contractual obligations and includes A/P, debt,
accrued expenses
Shareholder's equity - ANSWERS-is the residual
the value of the business available to the owners (shareholders) after debts have been paid off
Income statement - ANSWERS-illustrates the profitability of the company over a specified period
of time
broad sense: shows revenue-expenses
Balance sheet - ANSWERS-snapshot of the company economic resources and funding for those
resources at a given point in time (A = L + SE)
Revenue - ANSWERS-"top-line"
represents the sale of goods and services
