by Brian DeChesare Comments (29)

Investment Banking Case Studies: What to Expect, and How Not to Choke

3-Statement Model Case Study

If you’ve ever interviewed in Europe, you might have lingering nightmares about case studies in interviews and at assessment centers.

But the contagion is spreading!

Over the years, more students and professionals at all levels – in all regions – have been receiving case studies and modeling tests as part of the interview process.

If you approach them incorrectly, they could sink your chances.

But if you do them correctly, they might be the difference between “Offer” and never hearing back from the bank:

Types of Case Studies

You can divide case studies according to two main categories:

  • Type: Qualitative or quantitative. Do you read information and make a recommendation, or do you build a model and calculate numbers?
  • Time: Do you have 5 minutes? 30 minutes? 2 hours? 1 week? Shorter case studies are “speed tests,” while longer ones are more about your thought process and presentation skills.

For investment banking, specifically, these types of case studies are most common:

  • 3-Statement Models – You might receive a company’s financial statements in Excel and then get 20-30 minutes, up to 2-3 hours, depending on the complexity, to build a 3-statement projection model for the company.
  • Qualitative M&A Discussions – Should Company A acquire Company B, C, or D? What are the key deal issues that might come up? Sometimes you’ll have to back up your reasoning with simple calculations, but you’ll rarely build complex merger models due to time constraints.
  • Financing Discussions – Should Company A raise Debt or Equity to fund its planned acquisition or expansion? You can’t make this type of recommendation without looking at the numbers, so these case studies will be more quantitative.

LBO case studies are possible, but more likely for experienced candidates.

I haven’t seen that many examples of time-pressured valuation or DCF model-based case studies. They tend to be more common in investment banking case competitions, where you work in a team and you have days or weeks to finish.

The case study I’m covering here is based on a 3-statement projection model for Illinois Tool Works [ITW], a mid-sized manufacturer.

It falls squarely in the “speed test” category since it’s a 30-minute case:

Excel Files:

YouTube Tutorial and Step-by-Step Walkthrough:

What Are They Looking For?

Bankers do not expect perfection with any of these tests.

In fact, standards are quite low because most people do not even finish!

Interviewers want to verify that you understand the basics and have a strong enough foundation to learn more.

The biggest mistakes in time-pressured cases studies include:

  • Over-Thinking or Over-Complicating the Assumptions – You are completing a speed test, which means you have to go against your perfectionist/OCD tendencies.
  • Not Understanding the Type of Case Study – Many people attempt to turn qualitative cases into quantitative ones, or vice versa.
  • Not Finishing – If you don’t finish, you won’t be able to answer follow-up questions or present your findings. So, if you get a modeling case study, you better know the most common Excel shortcuts.

Take Me to the Examples and Walkthrough, Please

This case study is a bit tricky because they’ve given us some, but not all, of the assumptions:

Blog Post 05 Screen 02

The perfectionist/OCD way to handle that is to over-think minor details, such as whether you should use an average for Days Sales Outstanding or make it increase gradually over time.

The correct way to handle that is to make a quick decision and move on, so you actually finish in 30 minutes.

For this case study, we recommend the following completion order:

  1. Fill Out All the Assumptions First – You don’t want to jump between schedules constantly if you can avoid it – each jump costs you precious time.
  2. Fill Out the Entire Income Statement – See above.
  3. Fill Out What You Can of the Balance Sheet – This approach breaks down when you get to the Balance Sheet because some BS line items depend on IS line items, but others will be linked to the CFS.
  4. Fill Out the Entire Cash Flow Statement – Items here are simple percentage assumptions, absolute numbers, or reflections of changes in Balance Sheet line items.
  5. Finish Linking the Balance Sheet – Go back and complete the items that link to CFS line items. Cash and Equity should make the Balance Sheet balance.
  6. Check Your Work and Answer the Questions (If You Have Time) – If the Balance Sheet doesn’t balance, you need to find the error quickly.

I’m not going to do a step-by-step walkthrough with screenshots of everything because that’s better done in video format.

But I will highlight the tips and tricks you can use to finish these tests on time:

1) Don’t Enter Unnecessary Information

In time-pressured cases, every second counts. You can’t spend time entering data or formulas that are not required, or you’ll never finish.

Here’s an example:

Blog Post 05 Screen 03

2) If a Scenario Won’t Come Up, Don’t Build a Formula to Handle It

The perfect example of this one is the Amortization formula for the Debt:

Blog Post 05 Screen 04

It’s better to use a MIN formula to ensure that we never amortize more than the total remaining Debt balance.

But it’s irrelevant here because 5 * 10% = 50%, and there are no optional repayments, so that outcome is not possible; entering a MIN formula would waste precious seconds.

3) Use Beginning Balances to Avoid Circular References

Note that in this model, circular references could come up with Interest Income, but not Interest Expense, since the change in Debt is not linked to Net Income.

Still, we avoid this potential problem altogether by using the Beginning Balances to calculate the Interest Income and Interest Expense:

Blog Post 05 Screen 05

Using the Average Balances would be more accurate, but, at least for Interest Income, it would introduce a circular reference and make the model more unstable.

You do NOT want that in a time-pressured case because one small mistake or modification could cause a cascading series of #REF! errors throughout the model.

4) Fill Out the Entire Column First, and THEN Copy It Over

ITW’s Income Statement has 17 rows.

You could fill in the projection for each line item (Revenue, COGS, etc.), copy it across with Ctrl + R, and then move to the next row and do the same thing.

But it’s much faster if you finish the entire projected column first and then copy over that entire column:

Blog Post 05 Screen 06

This point might seem minor, but 5 vs. 85 keystrokes could represent 1-2 minutes of lost time, which is a lot for a 30-minute test.

5) Look at the Color Coding of Cells for Hints

If you don’t know if something should be an average or a hard-coded number, you can often look at the color coding of cells to figure it out: Black for formulas, blue for hard-coded numbers, and green for links to other worksheets.

You can enter dummy values into cells and see what font color comes up:

Blog Post 05 Screen 07

6) Remember the Rules for BS/CFS Links

I’ve seen a lot of mistakes with signs on the Balance Sheet.

Students often try to “figure out” if they should add or subtract when a Balance Sheet item depends on the same item in a previous year and a line item on the Cash Flow Statement.

But that’s unnecessary: If you’re linking to a Cash Flow Statement line item, and you’re on the Assets side of the BS, you subtract the CFS line item; on the L&E side, you add it.

If you know this simple rule, you can avoid headaches by minimizing the number of decisions you have to make.

7) Make Equity Your “Catch-All” If You Don’t Know Where Something Goes

You may not know what an item on the Cash Flow Statement flows into on the Balance Sheet: Where do “Other Non-Cash Items” and “Other Financing Items” go, for example?

The truth is, those items probably flow into multiple different Balance Sheet line items.

But doing that in a time-pressured test is a recipe for disaster.

If you don’t know where something goes, and especially if it’s small, non-recurring, or 0, make it flow into Equity:

Blog Post 05 Screen 08

There are some limits to this strategy: For example, you can’t take items that obviously flow into something else (like CapEx and Depreciation for PP&E) and link them to Equity.

But for small, non-recurring, or zeroed-out line items, this trick works well.

How Do You Improve Your Ability to Complete Case Studies?

A lot of people say, “Practice,” and I partially agree with that.

But you need deliberate practice as well.

It’s best to get actual case study examples rather than picking random companies and building models for them because:

  1. The focus is different. If you build models for random companies, you’ll spend a lot of time searching for data and adjusting the financial statements. But time-pressured case studies rarely, if ever, ask you to do that.
  2. It’s hard to “come up with” the right scenario to analyze. If you don’t pick the right company, the answers to questions such as the best acquisition candidate or Debt vs. Equity will be too easy or too difficult.

Putting It All Together: What You Need for IB Interviews

Over the past few weeks, we’ve covered topics related to the qualitative and quantitative side of interviews.

Here are the most important tasks to complete, even with extremely limited time:

  1. Draft Your “Story” – You need a 100-150-word outline and a 200-300-word full version.
  2. Outline Your 3 “Short Stories” – You can use these to answer questions about your leadership skills, work experience, challenges, failures, etc.
  3. Select 3 Strengths and 3 Weaknesses – These are what you say in an interview, not your real weaknesses.
  4. Prepare for the Top 3 Objections Bankers Will Raise About Your Background – Compare yourself to the “Ideal Candidate” that bankers are seeking, and see where you come up short.
  5. Look Up 1 Deal the Bank Has Worked on Recently – You need to walk in knowing something about the bank and group, or the interview is over.
  6. Prepare for 1 In-Depth Deal/Market/Company Discussion – We didn’t cover this topic in this series, but previous articles on deal discussions apply.
  7. (If Applicable) Prepare for 2 Discussions of Your Own Deals – If you’ve had previous IB, PE, or Big 4 experience, you must to be prepared to discuss a few deals you have worked on.
  8. Learn as Much as You Can of the Technical Side – It’s not possible to “learn” everything in a day or a week. But you can focus on the most important concepts (accounting and valuation/DCF analysis) and get decent results even if you have limited time.

You can finish almost everything on this list, except for the last item, in 1-2 days.

None of it requires advanced math, an Ivy League degree, or connections to rich and powerful people.

So, get started – no excuses.

Series – Interview Prep:

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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Read below or Add a comment

  1. Richie Easterly

    Do you have any examples of how to go through a ‘Qualitative M&A Discussions’?

    1. No free samples on this site currently. There are a few examples of “deal discussions” and how to outline your deals and discuss them if you do a search.

  2. Hi Brian,

    I had a urgent question regarding Excel Modelling Tests for a role in IB. It’s an analyst role in Capital Markets – specifically loans and securitisation. Given that its for an Analyst role and the time limit is 3 hours, what sort of excel modelling tests should i expect?

    Many thanks,

    1. We don’t have any examples of modeling tests for securitization roles. There are some possible possible interview questions here:

  3. Are these modeling tests typically for candidates trying to break in post MBA or for individuals with experience? Are these typical for students interviewing straight out of undergrad?

    1. These are normally for experienced individuals interviewing for lateral roles. Actual modeling tests are not that common for undergrad-level hires.

  4. The more difficult question is how do you check/audit financial model. I get asked this so often during interview. Especially for asso positions. Any tips? Thank you.

    1. Sorry, I don’t have a great answer for that one. It’s always harder reading/understanding someone else’s work. Probably start with the summary page and start by using Ctrl + { to trace precedents and figure out what everything links in from.

  5. Hi Brian,

    For amortization on row 56, is there a reason why you kept it flat at 10% of the FY’16 beginning balance across all periods? My first instinct was to use 10% of the beginning balance in each year, vs. anchoring it to the 2016 balance for all years. Would this be wrong? If so can you please explain why.


    1. I think I got it. Assuming amortization was meant to imply that 10% of the initial balance is the yearly “pmt” per year which doesn’t change and includes both principal and interest? (As opposed to the reduction of debt in each year).

      How badly would I get roasted by the interviewer for doing it the first way? (LOL)

      1. It’s much simpler than that because amortization is not separated into interest vs. principal, even conceptually. It is a simple fixed annual number.

        It wouldn’t be the end of the world if you got this wrong; it depends on how everyone else did. Mistakes are only an issue when they put you behind someone else in the interview process. But scores on case studies and modeling tests tend to be very low because most people cannot work quickly to solve a problem.

    2. Amortization is always a fixed annual number based on a starting balance, so you need to multiply the original balance by the percentage and use that same number each year.

  6. Hi Brian,
    could you please explain the working capital movements / articulation between Balance Sheet / Cash Flow Stats for the years 2014/2015. It does not add up or am i missing something (e.g. AR FY14: $2293M; AR FY 2015: $2203M, change in AR FY 2015: $42M)?

    1. This is a good example of something in the “Unnecessary details you must ignore in a time-pressured 30-minute case study” category. Yes, the numbers don’t match up. We don’t know why. That’s what the company listed on its historical statements. It’s fairly common for the historical numbers not to match up for a variety of reasons – acquisitions, changed accounting, different categorization on the statements, etc.

      The solution is simple: ignore it, move on, and aim to finish in 30 minutes so you pass the case study.

  7. Andreas Sakellaris

    Hi Brian,
    Is depreciation missing from the Income Statement section of this model?

    1. No. Depreciation may be an entirely separate line item on the IS, embedded within other expenses, or a mix of both. Here, it is embedded within other items (likely COGS, and maybe some in SG&A). The CFS always shows the full amount of Depreciation.

  8. Kind of a dumb excel question, but how do you enter the formula so that when you’re finished entering the formula, it stays on that cell? For example, I know after you enter the formula in cell A1, you can press enter and the formula enters but the pointer is now on A2. Likewise, if you press tab, the pointer is now on B1. What key enters the formula but keeps the pointer on A1?

    1. Options (Alt, T, O), Advanced, uncheck “After pressing Enter, move selection”

  9. is there any reason why you always start your formulas with a plus sign?
    Ex: =+A3*F3

  10. Hi Brian. Your guides are awesome! I’m doing this case study and I almost got the balance sheet to balance. The thing that prevented it from balancing was the “Interest Expense” and “Interest and Other Income” on the IS (Rows 112 &113). These are derived from the projections on rows 59 & 60. The Long Term Debt draws from the Balance sheet and the amortization draws from the SCF, but the Interest & Other Income draws from the Beginning Cash on the balance sheet and therefore is affected by the IS as it affects beginning cash on the SCF.

    I know my question might seem confusing, but it seems like there’s a circular reference here, where in order to get one thing, you need a second thing, and a third thing, but they tie back to the first thing. I hope I’m explaining this clearly, but my question is, which do you do first? I have your BIWS Fin Modeling course, but the example you used does not have debt, and therefore does not have this problem.

    Thank you for your time and any insight.

    1. Just checked again and I want to revise my question. Sorry for the confusion. My question is regarding the Interest and Other Income Only projections which flow into the IS and eventually into the SCF and ending cash. The interest based on the cash on the SCF, but how do you get that when the Interest and Other Income is tied to the cash balance which is affected by the IS?

    2. Rows 112 and 113 should not have circular references because they are both based on beginning Debt and Cash balances, not ending balances. You only get circular references if you use ending or average balances because then, the ending balance depends on cash flow during the year, which includes interest income and expense.

  11. Brian – During the modeling test, do the PE firm/bank typically give you a template or are you expected build the model from scratch (format, fill out all historical data from the financial statements etc)?


    1. It depends on the time available and the complexity of the test. If it’s a take-home case study where you have days to finish it, you probably won’t get a template. If it’s a simpler one where you have 1-3 hours to finish, you’ll probably get a template. And if it’s something really simple, e.g. a 20-line cash flow projection just to verify you can do it, you might have to start from a blank sheet and complete it without formatting or anything fancy.

  12. Hi Brian, Nicole or Nicola,

    I am a penultimate student from a “non target” school in the UK. I have done work experience with a Financial advisor previously for around a month. I have just signed up to a recruiting agency mainly for temp roles such as: administrator, PA, Team assistant, float assistant, etc. at Investment banks, AM, PE and HF firms.

    Would this be a very good way to get into an internship in IB(&PE, HF, AM etc.)? I feel it will as firstly I will gain experience of what it’s like to work in the industry, to work alongside bankers and possibly get a chance to help out with deals, traders (live deals), potentially build some financial models and network with some analysts, associates, VPs, Directors and MD’s at the office. What would you suggest I describe my experience as? ‘A Summer Investment Banking Intern’ or ‘Temporary operations support’ or Summer analyst intern’. Any help towards that also would be very helpful.

    I am also applying to the LSE, Imperial College London, Warwick, Durham and University of Cambridge for a masters degree in Management (however, specialising in Finance modules).

    I have followed your work closely, reading nearly every article you have posted and find it incredibly valuable.

    I appreciate your work and help,


    1. If you don’t yet have much experience (which it sounds like you don’t), then yes, potentially it’s a decent idea. Do not list “temporary” or “operations” in your title. If you don’t have a good title, list it as something like “Summer Analyst – [Firm Name]”

  13. Hey Brian,

    Been a fan of this site for a long time and I’d like I give back if possible. Not sure if you would be interested – or maybe you’ve done it already – but I work in FinTech and would be happy to do an interview.

    Let me know here if you are interested and I’ll reach out formally. Cheers.

    1. Sure, thank you! I will contact you soon.

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