Investment Banking Technicals Study Guide and Interview Questions 2026-04-10 Investment Banking Technicals Study Guide and Interview Questions.pdf
Investment Banking
Technicals Study Guide
and Interview Questions
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,Investment Banking Technicals 2026-04-10 Investment Banking Technicals.pdf
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,Investment Banking Technicals 2026-04-10 Investment Banking Technicals.pdf
studied
Terms in this set (258)
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 on the statement.
The Balance Sheet shows the company's Assets - its resources - such as
Cash, Inventory and PP&E, as well as its Liabilities - such as Debt and
Accounts Payable - and Shareholders' Equity. Assets must equal Liabilities
plus Shareholders' Equity.
The Cash Flow Statement begins with 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.
Can you give examples of major line items on each of the financial statements?
Income Statement: Revenue; Cost of Goods Sold; SG&A (Selling, General &
Administrative Expenses); Operating Income; Pretax Income; Net Income.
Balance Sheet: Cash; Accounts Receivable; Inventory; Plants, Property &
Equipment (PP&E); Accounts Payable; Accrued Expenses; Debt; Shareholders'
Equity.
Cash Flow Statement: Net Income; Depreciation & Amortization; Stock-Based
Compensation; Changes in Operating Assets & Liabilities; Cash Flow From
Operations; Capital Expenditures; Cash Flow From Investing; Sale/Purchase of
Securities; Dividends Issued; Cash Flow From Financing.
3 Page 3 of 76 Page 3
, Investment Banking Technicals 2026-04-10 Investment Banking Technicals.pdf
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 on the Cash Flow Statement.
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?
You would use the Cash Flow Statement because it gives a true picture of how
much cash the company is actually generating, independent of all the non-cash
expenses you might have. And that's the #1 thing you care about when
analyzing the overall financial health of any business - its cash flow.
Let's say I could only look at 2 statements to assess a company's prospects -
which 2 would I use and why?
You would pick the Income Statement and Balance Sheet, because you can
create the Cash Flow Statement from both of those (assuming, of course that
you have "before" and "after" versions of the Balance Sheet that correspond to
the same period the Income Statement is tracking).
Walk me through how Depreciation going up by $10 would affect the
statements.
Operating Income would decline by $10 and assuming a 40% tax rate, Net
Income would go down by $6.
The Net Income at the top goes down by $6, but the $10 Depreciation is a non-
cash expense that gets added back, so overall Cash Flow from Operations
goes up by $4. There are no changes elsewhere, so the overall Net Change in
Cash goes up by $4.
Plants, Property & Equipment goes down by $10 on the Assets side because of
the Depreciation, and Cash is up by $4 from the changes on the Cash Flow
Statement.
Overall, Assets is down by $6. Since Net Income fell by $6 as well,
Shareholders' Equity on the Liabilities & Shareholders' Equity side is down by
$6 and both sides of the Balance Sheet balance.
If Depreciation is a non-cash expense, why does it affect the cash balance?
Although Depreciation is a non-cash expense, it is tax-deductible. Since taxes
are a cash expense, Depreciation affects cash by reducing the amount of taxes
you pay.
4 Page 4 of 76 Page 4
Investment Banking
Technicals Study Guide
and Interview Questions
1 Guidehttps://www.stuvia.com/dashboard!@_)#*)(@$)($@*($@)($@*_
Page 1 of 76 Page 1
,Investment Banking Technicals 2026-04-10 Investment Banking Technicals.pdf
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2 Page 2 of 76 Page 2
,Investment Banking Technicals 2026-04-10 Investment Banking Technicals.pdf
studied
Terms in this set (258)
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 on the statement.
The Balance Sheet shows the company's Assets - its resources - such as
Cash, Inventory and PP&E, as well as its Liabilities - such as Debt and
Accounts Payable - and Shareholders' Equity. Assets must equal Liabilities
plus Shareholders' Equity.
The Cash Flow Statement begins with 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.
Can you give examples of major line items on each of the financial statements?
Income Statement: Revenue; Cost of Goods Sold; SG&A (Selling, General &
Administrative Expenses); Operating Income; Pretax Income; Net Income.
Balance Sheet: Cash; Accounts Receivable; Inventory; Plants, Property &
Equipment (PP&E); Accounts Payable; Accrued Expenses; Debt; Shareholders'
Equity.
Cash Flow Statement: Net Income; Depreciation & Amortization; Stock-Based
Compensation; Changes in Operating Assets & Liabilities; Cash Flow From
Operations; Capital Expenditures; Cash Flow From Investing; Sale/Purchase of
Securities; Dividends Issued; Cash Flow From Financing.
3 Page 3 of 76 Page 3
, Investment Banking Technicals 2026-04-10 Investment Banking Technicals.pdf
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 on the Cash Flow Statement.
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?
You would use the Cash Flow Statement because it gives a true picture of how
much cash the company is actually generating, independent of all the non-cash
expenses you might have. And that's the #1 thing you care about when
analyzing the overall financial health of any business - its cash flow.
Let's say I could only look at 2 statements to assess a company's prospects -
which 2 would I use and why?
You would pick the Income Statement and Balance Sheet, because you can
create the Cash Flow Statement from both of those (assuming, of course that
you have "before" and "after" versions of the Balance Sheet that correspond to
the same period the Income Statement is tracking).
Walk me through how Depreciation going up by $10 would affect the
statements.
Operating Income would decline by $10 and assuming a 40% tax rate, Net
Income would go down by $6.
The Net Income at the top goes down by $6, but the $10 Depreciation is a non-
cash expense that gets added back, so overall Cash Flow from Operations
goes up by $4. There are no changes elsewhere, so the overall Net Change in
Cash goes up by $4.
Plants, Property & Equipment goes down by $10 on the Assets side because of
the Depreciation, and Cash is up by $4 from the changes on the Cash Flow
Statement.
Overall, Assets is down by $6. Since Net Income fell by $6 as well,
Shareholders' Equity on the Liabilities & Shareholders' Equity side is down by
$6 and both sides of the Balance Sheet balance.
If Depreciation is a non-cash expense, why does it affect the cash balance?
Although Depreciation is a non-cash expense, it is tax-deductible. Since taxes
are a cash expense, Depreciation affects cash by reducing the amount of taxes
you pay.
4 Page 4 of 76 Page 4
