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Investment banking is a type of banking that organizes large, complex financial transactions such as mergers or initial public offer (IPO) underwriting. 

Thereby professionals involved in these banks and these processes are referred to as investment bankers.

While typically, a fresher usually starts a career in investment banking at the analyst position, one can typically rise to the position of associate and director, after several years.

A career in investment banking in itself is highly rewarding and often leads to a fairly rapid career progression.

Investment Banking MCQ

1.What are the three main valuation methodologies used in investment banking?

2.Why does a precedent transactions analysis typically produce a higher valuation than trading comparables?

3.What is enterprise value?

4.Why is EV paired with EBITDA rather than net income?

5.In a DCF, what discount rate is applied to unlevered free cash flow?

6.What does the terminal value typically represent in a DCF?

7.What constraint applies to the perpetuity growth rate in a terminal value calculation?

9.If depreciation increases by 100 with a 25% tax rate, what happens to net income?

10.Why is depreciation added back in the cash flow statement?

11.What is unlevered free cash flow?

12.What is the primary purpose of a leveraged buyout model?

13.Which characteristic makes a company a good LBO candidate?

14.What makes an acquisition accretive to the acquirer's earnings per share?

15.What is goodwill created in an acquisition?

16.What is due diligence in an M&A process?

17.What is a confidential information memorandum (CIM)?

18.What is a fairness opinion?

19.What is an initial public offering?

20.What does the term book building refer to in an IPO?

21.What is a green shoe option in an IPO?

22.What is a rights issue?

23.What is working capital in the context of a financial model?

24.What does the cash conversion cycle measure?

25.Why is beta unlevered and then relevered in a WACC calculation?

26.What is the equity risk premium in the CAPM?

27.Why is the after-tax cost of debt used in WACC?

28.What is a synergy in an M&A context?

29.What is a sensitivity analysis in a valuation model?

30.What is a football field chart used for?

31.What is the difference between a strategic buyer and a financial buyer?

32.What is a tender offer?

33.What is a poison pill?

34.What does a covenant in a debt agreement do?

35.What is mezzanine financing?

36.What is a comparable company analysis primarily sensitive to?

37.Why are LTM (last twelve months) figures often used in multiples?

38.What are non-recurring items and why are they adjusted for?

39.What is the primary role of a sell-side investment bank in an M&A transaction?

40.What is a lock-up period following an IPO?

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