The 20 Most Common IB Technical Questions (With Answer Sketches)

Interviewers pull from a surprisingly small core of technical questions. The variations are endless, but the underlying twenty or so questions repeat across banks, groups, and years, because they test the concepts the job actually uses. If you can answer everything below cleanly, including the follow-ups, you are covered for the large majority of first-round technicals.

Each question comes with a one-line answer sketch, not a full script. Use the sketch to check yourself; the goal is to be able to expand any of these into a 60-to-90-second spoken answer without notes.

Accounting (six questions)

Accounting questions open most technical rounds and generate the most follow-ups. The common failure mode is knowing the words but losing the mechanics under a follow-up, especially the tax effect and cash flow signs.

• Walk me through the three financial statements. Sketch: income statement shows profitability over a period; cash flow statement reconciles net income to the change in cash; balance sheet shows what the company owns and owes at a point in time.
• How do the three statements link? Sketch: net income flows to the top of the cash flow statement and into retained earnings; the ending cash from the cash flow statement is the cash on the balance sheet; balance sheet changes drive working capital and investing/financing lines.
• Walk me through 10 dollars of depreciation (assume a 40 percent tax rate). Sketch: pre-tax income falls 10, taxes fall 4, net income falls 6; on the cash flow statement, net income is down 6 but you add back 10 of non-cash depreciation, so cash is up 4; on the balance sheet, cash is up 4 and net PP&E is down 10, so assets are down 6, matching retained earnings down 6. Common mistake: forgetting the tax shield or claiming cash falls.
• What is working capital and why does it matter? Sketch: current assets minus current liabilities (operating working capital excludes cash and debt); increases in net working capital consume cash, decreases release it. Common mistake: getting the sign backwards.
• What is a deferred tax liability? Sketch: taxes owed in the future because book expenses and tax expenses recognize items on different timelines, classically accelerated depreciation for tax purposes versus straight-line for book.
• Can a company have positive net income but negative cash flow (or the reverse)? Sketch: yes; for example, aggressive revenue recognition with receivables ballooning, or the reverse with large non-cash charges depressing net income while cash holds up.

Enterprise value vs equity value (three questions)

Short topic, heavily tested, because it exposes whether you understand what a multiple actually measures.

• What is enterprise value and how do you calculate it? Sketch: the value of core operations to all capital providers; standard bridge is equity value plus debt, preferred stock, and noncontrolling interests, minus cash and equivalents. Hedge on edge items like leases and pensions, which vary by convention.
• Why do you subtract cash? Sketch: under the standard treatment cash is a non-operating asset, and a buyer of the whole business effectively acquires the cash, reducing the net cost of the operations.
• Which metrics pair with EV and which with equity value? Sketch: EV pairs with metrics before interest that accrue to all capital providers (revenue, EBITDA, EBIT); equity value pairs with metrics after interest that belong to shareholders (net income, so P/E). Common mistake: quoting EV/net income, which mixes claimants.

Valuation methodologies (three questions)

These test judgment more than mechanics. Interviewers want reasons, not just lists.

• What are the main valuation methodologies? Sketch: comparable companies, precedent transactions, and the DCF; mention LBO analysis as a floor-value check and asset-based approaches where relevant.
• Why do similar companies trade at different multiples? Sketch: differences in expected growth, margins and returns on capital, risk, size, and liquidity; a higher multiple is usually the market paying for higher expected growth or lower risk.
• Which methodology gives the highest value? Sketch: it depends on assumptions, but precedent transactions often come in above trading comps because they include a control premium, and a DCF can be highest or lowest depending on the forecast and discount rate. Common mistake: stating one fixed ranking as a law.

DCF (four questions)

The DCF walkthrough is the single most requested valuation question. Aim for a clean two-minute version with every follow-up covered.

• Walk me through a DCF. Sketch: project unlevered free cash flows for 5 to 10 years, estimate a terminal value, discount everything to today at WACC to get enterprise value, then bridge to equity value and per-share value.
• How do you calculate unlevered free cash flow? Sketch: EBIT times one minus the tax rate, plus D&A, minus capex, minus the increase in net working capital. Common mistake: subtracting interest, which belongs to the financing side, not unlevered cash flow.
• What is WACC and how do you calculate it? Sketch: the blended required return of all capital providers; cost of equity times the equity weight plus after-tax cost of debt times the debt weight, with cost of equity typically from CAPM (risk-free rate plus beta times the equity risk premium).
• How do you calculate terminal value? Sketch: Gordon growth, final-year FCF times one plus g, divided by WACC minus g, with g at or below long-run economic growth; or an exit multiple applied to a terminal-year metric like EBITDA. Common mistake: picking g greater than or equal to WACC, which breaks the formula.

M&A (two questions)

Entry-level M&A questions focus on accretion/dilution intuition and basic purchase accounting.

• When is a deal accretive or dilutive? Sketch: accretive when the deal adds more to earnings than it costs in new shares or financing; the classic all-stock rule of thumb is that if the acquirer's P/E is higher than the P/E paid for the target (including the premium), the deal is accretive, ignoring synergies. For cash deals, compare the target's earnings yield to the after-tax cost of the cash or debt used. Common mistake: forgetting the premium or the ignoring-synergies caveat.
• What is goodwill and how is it created? Sketch: goodwill is the excess of the purchase price over the fair value of the target's net identifiable assets; it sits on the acquirer's balance sheet and is tested for impairment rather than amortized under US GAAP for public companies.

LBO (two questions)

Even in banking (not PE) interviews, expect at least the intuition-level LBO questions.

• Walk me through an LBO. Sketch: a sponsor buys a company using a large share of debt, uses the company's cash flows to pay down debt and grow EBITDA over the hold period, then exits; returns come from debt paydown, EBITDA growth, and any multiple expansion.
• What makes a good LBO candidate? Sketch: stable and predictable cash flows, modest capex needs, a reasonable purchase price, deleveraging capacity, strong management, and ideally some operational improvement levers. Common mistake: answering only high growth, which matters less than cash flow stability.

How to actually learn these

Do not read this list five times. Cover the sketches, say each answer out loud, and check yourself against the sketch. Then drill the questions in mixed order, because interviews do not go topic by topic. WACC Buddy's Daily 10 serves these exact core questions in a spaced rotation, and the free Top 50 guide covers the full written answers if you want the long-form versions.

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