The investment banking interview question we’re going to go over today is “What are the different valuation methodologies?” This is a very basic question, so interview is not going to last very long if you don’t get this question correct. Here’s what you can say for your answer.
“There are four main valuation methodologies. First, there’s DCF, which values the business based on its future cash flow. Second, there’s Public Comparables, which values the business based on what peers are trading at. Third, there’s Precedent Transactions, which values the business based on past M&A transactions. And lastly, there’s LBO, which values the business based on the return it can generate for investors. These are the four main valuation methodologies.”
In short, this is how you can answer this question: “What are the different valuation methodologies”. Don’t talk too much for your answer to this question. It’s so simple that the interviewer is not expecting an extended answer from you. It’s often used as a stepping stone to pave the way for the follow up valuation questions.