EVERYTHING YOU NEED TO KNOWTO SURVIVE (AND GET) A

FINANCE INTERVIEW

By Sarah Watterson

Edited By Rich Curtis

2008

Table of Contents:

I. How to Get the Interview

II. How to Dress for the Interview

III. How to Prepare Before the Interview

a. Sales and Trading

b. Investment Banking

c. Research

IV. How to Ace the Interview

V. How to Follow-Up to an Interview

I. HOW TO GET THE INTERVIEW

No matter what anyone tells you, the hardest part of theinternship process is getting an interview. These companies haveliterally thousands of resumes flying right under their noses and YOUhave to stand out in order to have a chance amongst the rest. Sure,you may have a 4.0 average from an Ivy League school and be thePresident of a club or two, but guess what, a lot of YOUs are out theirapplying for these types of internships as well.

Here are some tips to best prepare yourself and you resume for theinterview process

Get involved

The worst thing to hear from students is that they did notknow what to get involved in while they were at college.There are endless opportunities to get involved in activitiesthat meet any need on Cornells campus. Companies liketo see that students are involved in every setting that theyare in for multiple reasons:

o It shows dedication to your environment

Companies want people that they will want torepresent their company later on

o It shows a sense of character and personality

When you can be part of a team or the leader ofa team, you have successfully honed a verydesired character trait that companies wanttheir employees to possess

o It shows initiative and motivation

In a school of 14,000+ students, taking oninvolvement in several activities shows theinitiative that many finance firms look for whenhiring.

Cornells Student Activity Office is a great resource for youto check out the types of clubs you would like to be affiliatedwith. You can check out the club descriptions andmeeting times at:

o http://sao.cornell.edu/SO/

Resume

After you have taken the initiative to involve yourself inseveral activities, it should be relatively feasible to beginbuilding a good resume. Your resume is crucial to gettingan interview because the employer (normally) only has thisone piece of paper to try to build an accurate picture ofyou in his or her mind. Therefore there are some things youshould definitely do:

o PROOFREAD

This seems like it should go without saying, butso many employers claim that they will stopreading a resume if there is any type of errorpresent. This means that if you are carelesswith any grammatical or spelling mistakes yourinternship search could be over before theyeven begin looking at your positives.

Furthermore, at this time you should also beforewarned that ALL of the informationpresented on your resume can be attached toyour name. Therefore, DO NOT LIE ABOUTANYTHING. If you get an internship and theyfind out that some of your information is false,you will be held liable and your job could betaken away.

Network, Network, Network

While you are busy getting involved make sure you aremeeting people and learning from them. It goes withoutsaying that if you are interested in a job in finance, joinsome of the finance-related clubs here on campus.Interviewers will ask you why you are interested in financeand you better have a good answer for them.

Joining finance-related clubs will also help your ability tomeet people in the fields you want to go into:

o You should be contacting Cornell alumni at the banksto talk to you about their experiences. This will be sobeneficial, because not only are they a part of therecruitment effort for your school, but usually they areyoung professionals willing to take the time to exploreyour interests and tell you about their experiences.AEM alumni are mostly always willing to give up theirtime to help Cornellians. However, YOU must takethe effort and initiative to contact them!

o The AEM alumni link on the website can be useful

http://aem.cornell.edu/undergrad/network.htm

Also, make sure that you are going to all of thepresentations provided to Cornell by the companies. If youare unsure as to when the companys presentations will be,go on the companys website and look at their recruitingcalendar. You should definitely see Cornells name onthere.

o Meet people and remember names

I will save you a lot of time and aggravationthroughout your job search and tell you that ifyou do not like meeting people and learningabout what they do, YOU SHOULD NOT BEINTERVIEWING WITH THEM. Companies seethrough people who are not showing a genuineinterest and if that is not reason enough, dosomething you want to do, not something youfeel like you should be doing just because

o Also always follow-up

Ask for a business card and always follow-upwith the people you meet. They are going tomeet at least 50 students at thesepresentations. Send them a thank-you note(NOT GENERIC) and let them know that youenjoyed speaking with them and would love tolearn more about what they do!

More on Following-Up in How to Follow-Up toan Interview

II. HOW TO DRESS FOR THE INTERVIEW

The best advice Ive ever received regarding to dress is to Dress forthe job you want to have. Sure, the dress code may be businesscasual, but if you show a little effort and go the extra step all the time itwill be noticed. For mostly all finance-related interviews your dresscode will be business professional.

Princeton Review says that this means:

Business Professional for Women:

Suitblack, gray, dark burgundy or navy Contrasting jacket and skirt Two-piece dress White or off-white blouse Solid color blouse (may be pastel) Gold or silver earrings Scarf that picks up colors from the suit Black, navy or taupe pumps Neutral or taupe hosiery Black, dark brown or burgundy leather handbag All-weather coat Black, brown or burgundy briefcase

Business professional for Men:

Suitssolid-color navy, gray and charcoal gray (one each color) Black socks, two pairs navy socks Pin-striped navy suit, same in gray Tiesburgundy, red print, navy, mauve, striped silk and

patterned silk Navy sport coat with gray trousers Black leather belt

White cotton shirts, a blue or pin-striped shirt Black leather briefcase Black slip-on shoes, or black lace-up shoes

(http://www.princetonreview.com/cte/articles/hired/dressUp.asp)

Also, now that you know what is acceptable to wear you should also befamiliar with things that are NEVER acceptable to wear:

Flip-flops or open toed shoes Big over-accentuated jewelry Heavy smelling perfume or cologne Large hair accessories or hats Bare midriffs Low-cut garments Anything that is too tight Jeans Shorts or T-Shirts Sarah, how about skirts or dresses that are too short?

III. HOW TO PREPARE BEFORE THE INTERVIEW

Before beginning to prepare for the interview, you need to assess whatis expected of you throughout the interview. This will depend uponwhat type of job you are interviewing for (e.g. sales and trading,investment banking, or research), as well as what type of interviewthat the interviewer will choose to conduct.

I will first go over the types of interviews used by employers and then Iwill talk more in depth about how to prepare for each interview: salesand trading, investment banking and research.

GO THROUGH THE TYPES OF INTERVIEWS USED BYEMPLOYERS AND PREPARE ANSWERS FOR THE QUESTIONSYOU THINK YOU MIGHT BE ASKED

A. What is the point of the interview?

- Goals of the Interviewer:

o Assess intelligence, competence, and fit of the prospectiveemployee

- Goals of the Interviewee:

o Control the tone and tempo of the interview by suiting theanswers and direction of the conversation to YOURstrengths

o Have a general story about yourself that you want to createfor the interviewer.

For example, you might be a qualitatively-inclinedEcon major who has been taken by the recenthappenings in the economy and the credit crisis.After reading the Wall St. Journal to learn moreabout what is going on, you are becominginterested in the world of finance.

For example, you could be a star basketball playerwho has always strived to show your competitive spiritin all that you do. You are a driven and motivatedindividual who never wants to lose and enjoyslearning new things.

Point your story DOES NOT necessarily have to bedirectly related to finance, but it sure as hell better letthe interview know something that will make him orher want to hire you and work with you (i.e. fastlearner, competitive spirit, etc)

B. Interview Preparation

- While preparing for your interview, make sure to ask all thosestupid questions to networks you have made at school oryoung professionals working for companies.

o Point Do not ask a managing director who will beinterviewing you about Sales and Trading the day beforeyour interview

- Use Vault Interview Guide and Vault Company Guides to helpgive you a sketch of what will be expected through yourinterview. Please search through these different guides andpull information that will help you regarding your specificcompany or job. These resources are available to youonline

Vault Access

The Vault Online Career Library requires a password for access to itsguides. Please enter the password indicated below on the Vault loginpage:

Password: cornellcsPlease click here to continue

Wetfeet Access

Wetfeet requires a user name and password for access to its guides.Please enter the user name and password indicated below whenprompted:

User Name (case sensitive): CUStudentPassword: cornellcs

Please click here to continue

C. Types of Questions for Each Job:

Technical: Questions that relate directly to the nature of theposition for which you are interviewing. These differ from job tojob

o Investment Banking: Accounting, Valuations

Example: Explain the discounted cash flow method ofvaluation.

o Sales and Trading; Quantitative brainteasers, investmentideas, macroeconomic views

Example: Whats been happening to the dollar andwhere will it be in six months?

o Research; Stock ideas that you would short and long;Valuations

Example: You are a pharmaceutical/biotechresearch professional. Pitch me a stock that youwould go long and short right now and why?

How to go about answering the technical questions

o Manage the expectations of the interviewer

Do not feign knowledge

If you are not a finance/business major let themknow that while answering the question

The less they expect, the more easily impressedthey will be with something that you know

Example: What type of a stock would you pitchme right now?

o Although I have never taken finance, Iknow that you are a twenty-somethingyear old male with a comfortable living.Therefore, you are looking for somethingthat is kind of risky and something that youcould make you a good return.Therefore I would pitch you somethinglike

o This showed that you based yourinvestment decision on the preferencesand earnings of your prospective client.Even though you claimed to know nothing,they would be impressed that you knewsomething!

o Never go deeper into a subject than you feel completelycomfortable with

If you try to impress the interviewer by talking abouttopics you dont fully understand, you will beembarrassed by the interviewer

For my first interview ever when I was asophomore in college, the woman interviewingme asked me if I knew anything about UnitedStates inter-bank lending practices. I hadnever taken finance, but I remembered readingsomething in the Wall Street Journal about thisthing called LIBOR. I started talking and talkingabout this LIBOR and how it controls UnitedStates inter-bank lending and very in-depthprocedures used. She kept probing me andprobing me and I kept talking about these

foreign things that I knew nothing about at all.After the interview I found out the LIBOR wasthe London Inter bank Offering Rate and Ibasically felt like a really idiot. Needless to say Idid not get that job, but at least I learned mylesson.

Remember that as a student who has never had a jobin finance, you dont know anything, so dont try topresent yourself as a know-it-all

o If you dont know something exactly, show effort to providesome answer

If you dont exactly know what a CDO is, you mightknow they have something to do with mortgages.This opens the conversation to something that youmight be able to talk more intelligently about

One young man (08) going to work at Lazard wasasked something about a specific price of something.He wittingly said, I do not know what that actuallymeans or what the price is, but I know that it is locatedon the back of the Wall Street Journal next to theweather. This impressed the interviewer, because hedid not pretend to know something, but it showed thathe did read the Wall Street Journal regularly.

o If you dont nail a technical question, dont lose yourcomposure. One question wont sink you, but losingconfidence for the rest of the interview definitely will!

Company Questions

o Students, it is plain and simpleLEARN ABOUT THECOMPANY

o Companies want employees that feel emotionallyconnected to the firm. This minimizes turnover andincreases productivity. It costs A LOT of money to hire andfire, so companies do not want to do it very often!

o Company websites can be very helpful

Simply Google the company and look up headlines

Go to companys website and look over career section

Learn about the firm management (they will ask youwho the CEO, CFO, and Presidents are very often)

Know about their international presence and initiatives

Behavioral: Questions that assess your character, personality,and fit. You want to demonstrate several qualities/characteristicswhen answering these questions

o Business Acumen/Professionalism: These will mainly focuson your past experiences and what youve learned fromthem

o Leadership: How youve become a leader, when youvebeen challenged and how you dealt with obstacles

o Teamwork: Examples of how youve worked on a team andwhat roles youve taken

o Analytical Skills

o Initiative

Answering Behavioral Questions

o Each answer should demonstrate at least two of thequalities above

o Present your answers in STAR framework

Situation: Basic background on the circumstances

Task: What was the immediate assignment/obstaclefacing you (best if presented as some kind ofadversity)

Action: What exactly did you do to accomplish thetask

Result: What did you learn from the experience, howdid you grow from the adversity

o By the end of your answer, the interviewer should have aclear understanding of the qualities that you aimed toexpress in your answer

QUESTIONS TO EXPECT (PREPARE) FOR EACH JOB INTERVIEW

Investment Banking (provided by http://www.ubsla.com/ibp/):

Technical:

1. Walk me through a DCF.2. What is valuation? 3. What are different methods of valuing a company?4. Walk me through the financial statements. How do they tie

together?5. How would a change in depreciation expense flow through the

financial statements?6. How would a change in LIFO/FIFO flow through the financial

statements?7. Walk me through an increase in depreciation expense of 10mm? 8. What happens if capital expenditure increases by 10mm? 9. Walk me through the purchase of a truck for 10 mm

10. When would you issue debt and when would you issue equity? 11. How would you normalize a $20m restructuring charge?12. Given such a change in interest rates, what will happen to bond

prices?13. What is EBITDA? EBIT? Why are they important? When would

you use EBIT vs. EBITDA?14. What is WACC? How do you calculate the growth rate for

WACC? 15. Where do you get the risk free rate?16. What are multiples? How do you know which ones to use?17. What is 15 x 17?18. Enterprise Value is 100, Equity value if 150, what is net debt?19. For Acquisition vs. Public Comparables, which would be greater

and why?20. What are the drawbacks of using WACC in valuing companies?21. What multiples would a company use? 22. When would a company issue debt? How about equity?23. What is cheaper, debt or equity?24. What is an LBO?25. What are some measures of cash flow for a company?

26. How do you get FCF from EBITDA?27. What would happen to net change in working capital if

receivables went up?28. What is our companys stock price? Is it fairly valued or over-

valued? 29. You buy an investment for $100m, you sell it for $100m, how

would you make a profit?30. What are the different types of debt? How do they differ?31. If interest rates increase, what happens to bond prices?

Brain Teasers:

1. What is the present value of a zero-coupon perpetuity?2. Its 9:45 pm, how would you go about finding the angle between

the minute and hour hand?3. Two boats are going at 10miles/hour. They are 5 miles from one

another. How long before they hit?4. What is the sum of all the numbers between one and one

hundred?5. If this table was full of pennies, do you think they could stack up

to measure this building?

Sales and Trading (partially provided by http://homepages.luc.edu.htm):

Technical:

1. Why would two companies merge? 2. Why might a company choose debt over equity financing?3. Where is our firm's stock trading at?4. Where is the Dow Jones today? S&P? NASDAQ? 20-year or 30-

year TBonds?5. Where do you think interest rates will be 2 years from now?6. How do you value a bond?7. How are bonds and interest rates related?8. Where is the market going? What is going on in the economy?

9. Who is the Fed Chairman?10. If you could meet the Fed Chairman today, what would you tell

him to do with our current economy?11. Tell me three items on the front page of today's Wall Street

Journal.12. Explain one stock you would pitch to me?13. Explain one stock you would long and/or short? Why?14. Do you personally invest in stocks? Which ones? Why?

i. If you do not currently invest, you should explain whynot!

Brain Teasers:1. How many hot dogs would you sell at the Superbowl?2. How many miles to the center of the Earth?3. How many potholes in New York City?4. How many cars in the United States?

Research:

Technical:1. Prepare many stocks to go long/short on.2. Know how to calculate FCF (Free Cash Flow)3. Know how to run a DCF (Discounted Cash Flow)4. Know the interrelationship between the three main financial

statements5. How should a P/E ratio affect how a stock should be rated?

If you want to specialize:

6. Go long/short on Biotech/Pharmaceutical/Consumer Goods, etc?7. Why do you want to work in BLANK sector?8. What makes you qualified to work in BLANK sector?

IV. HOW TO ACE THE INTERVIEW

Basic Structure of the Interview

- Greeting: First 30 seconds are critical. Smile, confidentintroduction, good handshake. Cannot underestimate theimportance of first impressions

- Tell me about yourself: This is an opportunity to introduceyourself as a person, not necessarily as a professional. Theywant to hire someone they like, someone they can relate to, sotell them the things that make you seem interesting. You wantto establish a connection with your interviewer.

- Walk me through your resume: Have a story or two ready foreach major part of your resume (each job experience, clubmembership, etc.)

- Technical/Behavioral Questions

- Questions for the Interviewer

End of the Interview

Why do you want to work for this company? Focus on learning,developing your skills in an area of interest, and company culture

Questions for the Interviewer

o Ideally, you will have figured out with the interviewersposition is and you can ask a question that relates to thempersonally

Ask them about their impression of the firms culture and why theyvestayed with the firm (Why do you get up to go to work?)

The main way to ace the interview is to honestly be yourself. You aregoing to be working with these people for MANY, MANY hours a dayand you will have to get along. You will often hear about the airplanetest. This is the little test employers do when they interview. They liketo see if they could stand sitting next to you for three-hour flight. Benormal, be genuine, be likeable and you are surely going to ace theinterview. Read the interviewers body language. If you see that theinterviewer is enjoying your story, continue. However if he or shelooks bored, STOP IMMEDIATELY. Also, people always like to hearthemselves speak, so make sure that you are giving the interviewerevery opportunity to speak throughout the interview!

V. HOW TO FOLLOW-UP THE INTERVIEW

Often this part is left out. However, it is very important. When you areinterviewing, make sure to think of a few important points that youspoke about with the interviewer. Then formulate a cohesive, eloquent,and error-free note for your interviewer.

They are hiring you to work with clients. If you write chicken-scratch orhave errors, they will not want someone like you to work for thembecause then you will not be trusted to work with clients. Therefore,proofread, proofread, and proofread!

Also, make sure that you are following a formal format. No LOL, Thanxor any other type of slang will be permitted! Your note can be onlinebecause that will be the most effective way to reach theseprofessionals.

Lastly, many times the turnaround time between when you areinterviewed and the decision to move to the next round is very fast.Therefore, get a nice note out to your interviewer as quickly aspossible. That being said, do not run out of the interview and type it up.Write it around lunchtime if you interview in the morning and waithalfhour to an hour if you interview in the afternoon.