Finance Case Study & Modeling Test Guide
Types of Case Studies
| Type | Common In | Format | Time Limit |
|---|---|---|---|
| LBO Modeling Test | Private equity | Build an LBO model from a CIM or data packet | 1–3 hours |
| DCF / Valuation Exercise | IB, equity research | Value a company using DCF and/or comps | 1–2 hours |
| Merger Model | Investment banking | Build accretion/dilution analysis for a proposed deal | 1–2 hours |
| Investment Memo | PE, hedge funds | Write a full investment recommendation with analysis | Take-home (24–72 hours) |
| Stock Pitch | Hedge funds, AM | Research and present a long or short idea | Take-home (1–7 days) |
| Business Case | Corporate finance, consulting | Analyze a strategic decision (M&A, market entry, restructuring) | 30–60 min |
LBO Modeling Test
The most common PE case study. You’ll receive a confidential information memorandum (CIM) or simplified data sheet and need to build an LBO model from scratch. Key components:
Build a sources and uses table, project the income statement and free cash flows for 5 years, create a debt schedule with mandatory amortization, model the exit at various multiples, and calculate IRR and MOIC. Use sensitivities on entry multiple, exit multiple, and leverage levels. Present your recommendation: would you invest at this price?
Tips for LBO Tests
Start with the output in mind — know exactly what you’re solving for (IRR and MOIC) before building anything. Keep your model clean: separate inputs, calculations, and outputs. Use color coding (blue for inputs, black for formulas). Don’t over-engineer — a simple model that works is infinitely better than a complex model with errors. Allocate time: 10% reading the case, 60% building the model, 20% checking for errors, 10% preparing your recommendation.
DCF / Valuation Exercise
You’ll value a company using a DCF, comparable companies, or both. Focus on getting the structure right: revenue build, operating margins, free cash flow calculation, WACC, and terminal value. Common mistakes: forgetting to project working capital changes, using book value instead of market value for WACC weights, and choosing an inappropriate terminal growth rate.
Investment Memo (Take-Home)
Take-home case studies give you 24–72 hours to research a company and write an investment recommendation. Structure your memo like a professional investment committee presentation:
| Section | Content | Length |
|---|---|---|
| Executive Summary | Recommendation, target price, key thesis points | 1 page |
| Business Overview | What the company does, industry dynamics, competitive position | 1–2 pages |
| Investment Thesis | 2–3 specific reasons the stock is mispriced | 2–3 pages |
| Financial Analysis | Historical trends, projections, valuation | 2–3 pages |
| Risks & Mitigants | What could go wrong and why you’re still comfortable | 1 page |
| Appendix | Detailed model, sensitivity tables, comp sheets | As needed |
How to Prepare
Build 3–5 models from scratch before your interview season starts. Start with a simple three-statement model, then build a DCF, then an LBO. Practice under timed conditions — if you can build a basic LBO in 90 minutes, you’re well-prepared. Review your models for common errors: circular references, hardcoded numbers that should be formulas, and broken links between sheets.
Study real CIMs and 10-K filings to practice extracting the right data points. Most modeling mistakes happen because candidates don’t know which numbers to use, not because they can’t build formulas. Combine this with your technical interview prep — the concepts are the same, just applied in Excel.
Day-Of Strategy
Read the full case study before touching Excel (10–15 minutes for timed tests). Identify the key question: Are you deciding whether to invest? Advising on a deal? Valuing a target? Build your model structure first (lay out all tabs and sections), then populate with data. Check your outputs against common sense — if your IRR is 50% or your enterprise value is 10x the actual market cap, something is wrong. Save frequently.
Key Takeaways
- Case studies test execution, not just knowledge — you need to build models accurately under time pressure.
- For LBO tests: sources & uses → projections → debt schedule → exit → returns. Practice this flow until it’s automatic.
- Spend 10–15% of your time reading the case before building anything. Understanding the question is half the answer.
- Always sense-check your outputs. An IRR of 50% or an enterprise value wildly off from the market cap means you have an error.
- Build 3–5 practice models from scratch before interview season — there’s no substitute for hands-on experience.
Frequently Asked Questions
How long does a typical modeling test take?
Timed in-office tests run 1–3 hours. Take-home case studies give 24–72 hours (but expect to spend 8–15 hours of actual work). Some firms do “paper LBOs” — simplified mental exercises that take 15–20 minutes during a regular interview round.
What Excel skills do I need for modeling tests?
Master shortcuts: Ctrl+C/V, F2 (edit cell), F4 (toggle absolute references), Alt+= (autosum), Ctrl+Shift+L (filters), and Ctrl+[ (trace precedents). Know INDEX/MATCH, SUMPRODUCT, and IF functions cold. Build your models keyboard-only — touching the mouse slows you down.
Can I use templates or pre-built models?
For timed tests, you usually start from a blank workbook — no templates allowed. For take-home cases, you can use your own templates but should customize heavily. Interviewers can tell when outputs come from a template that wasn’t adapted to the specific situation.
What happens if I make a mistake in my model?
Small errors are forgivable if your structure and logic are sound. Interviewers often check methodology and approach more than exact numbers. However, major errors (wrong formula for FCF, circular references, broken debt schedule) can disqualify you. Always allocate time for error-checking.
How do case studies differ between IB and PE interviews?
IB tests typically focus on valuation (DCF + comps) and merger analysis. PE tests center on LBO modeling and investment decision-making. PE case studies also tend to ask “would you invest?” requiring you to form and defend a recommendation, not just crunch numbers.