Every Formula You Need for Investment Banking Interviews (Cheat Sheet)

This is the complete formula reference for investment banking interviews. Every formula below has either been asked directly in interviews or underpins a concept that gets tested. No explanations you don't need – just the formulas, what they mean, and when you'd use them.

Bookmark this page. Come back to it the night before your interview.

Enterprise Value & Equity Value

Formula	What It Means
Enterprise Value = Equity Value + Net Debt + Minority Interest + Preferred Stock – Associates	Value of core business operations to all capital providers (debt + equity). Used for EV-based multiples.
Equity Value = Share Price × Diluted Shares Outstanding	Value of the company to common shareholders only. Also called market capitalisation (basic) or fully diluted equity value.
Net Debt = Total Debt – Cash & Cash Equivalents	The net obligation to debt holders after accounting for available cash.
Diluted Shares = Basic Shares + In-the-Money Options (Treasury Stock Method) + Convertibles	Accounts for all potential shares that could be outstanding. Treasury stock method: (Options × (Price – Strike)) / Price.

DCF Valuation

Formula	What It Means
UFCF = EBIT(1–t) + D&A – CapEx – ΔNWC	Unlevered Free Cash Flow: cash generated by operations available to all investors, before debt payments.
WACC = (E/V)(Re) + (D/V)(Rd)(1–t)	Weighted Average Cost of Capital: blended return required by all capital providers. The DCF discount rate.
Cost of Equity (Re) = Rf + β(Rm – Rf)	CAPM: Risk-free rate + (Beta × Equity Risk Premium). The return equity investors require.
Terminal Value (Gordon Growth) = FCF × (1+g) / (WACC – g)	Value of all cash flows beyond the projection period assuming perpetual growth at rate g.
Terminal Value (Exit Multiple) = Terminal Year EBITDA × Exit Multiple	Value beyond projection period using a market-based multiple. Cross-reference with Gordon Growth.
PV = CF / (1 + r)^n	Present Value: discount any future cash flow at rate r for n periods.

Valuation Multiples

Multiple	Formula	When to Use
EV/EBITDA	Enterprise Value / EBITDA	Most common. Capital-structure neutral, ignores non-cash charges. Use for most sectors.
EV/Revenue	Enterprise Value / Revenue	Pre-profit companies (SaaS, biotech). When EBITDA is negative or meaningless.
P/E	Share Price / Earnings Per Share	Equity-level multiple. Affected by capital structure. Common for mature, stable businesses.
P/B	Share Price / Book Value Per Share	Banks and financial institutions where book value is meaningful.
EV/EBIT	Enterprise Value / EBIT	When D&A differences between comps are significant. More conservative than EV/EBITDA.

Interviewer Tip

Remember: EV-based multiples (EV/EBITDA, EV/Revenue) match with metrics before debt – to the whole enterprise. Equity-based multiples (P/E, P/B) match with metrics after debt – to equity holders only. Never mix them.

M&A Formulas

Formula	What It Means
Accretion/Dilution = Combined EPS – Standalone Acquirer EPS	If positive, the deal is accretive (EPS goes up). If negative, dilutive. Tests whether the deal creates value for acquirer shareholders.
Quick Test: Target P/E < Acquirer P/E → Accretive (all-stock deal)	If the target is 'cheaper' on a P/E basis, issuing stock to buy it increases combined EPS.
Offer Premium = (Offer Price – Current Price) / Current Price	How much above the current share price the acquirer is willing to pay. Typically 20–40%.
Goodwill = Purchase Price – Fair Value of Net Assets	The premium paid above the fair value of the target's identifiable assets minus liabilities.

LBO Formulas

Formula	What It Means
MOIC = Exit Equity Value / Initial Equity Invested	Multiple of Invested Capital: a 2.5x MOIC means you got back £2.50 for every £1 invested.
IRR ≈ MOIC^(1/n) – 1	Internal Rate of Return approximation. 2x in 5 years ≈ 15% IRR. 3x in 5 years ≈ 25% IRR.
Purchase Price = Entry EBITDA × Entry Multiple	How much the PE firm pays for the company.
Exit Value = Exit EBITDA × Exit Multiple	What the company is worth when the PE firm sells.
Exit Equity = Exit Value – Remaining Net Debt	The equity proceeds to the PE firm after paying off remaining debt.

Profitability & Leverage Ratios

Ratio	Formula	What It Tells You
Gross Margin	(Revenue – COGS) / Revenue	Profitability after direct costs. How efficiently the company produces.
Operating Margin	EBIT / Revenue	Profitability after operating expenses. Core business efficiency.
Net Margin	Net Income / Revenue	Bottom-line profitability after everything including tax and interest.
ROE	Net Income / Shareholders' Equity	Return on equity. How effectively the company uses shareholders' capital.
ROA	Net Income / Total Assets	Return on assets. How effectively the company uses all its assets.
ROIC	NOPAT / Invested Capital	Return on invested capital. Best measure of true operating returns.
Debt/EBITDA	Total Debt / EBITDA	Leverage ratio. How many years of earnings it would take to repay debt.
Interest Coverage	EBIT / Interest Expense	Can the company cover its interest payments? Below 1.5x is risky.
Debt/Equity	Total Debt / Total Equity	Capital structure ratio. Higher = more leveraged.