Practice Financial Modeling by Industry & Model Type

An LBO model tests whether you can size a sources & uses schedule, build a debt paydown / cash sweep, and solve for the sponsor's MoIC and IRR at exit — all while your entry multiple, leverage, and exit assumptions move independently. Interviewers use it to see if you understand what actually drives returns, not just whether you can fill in a template.

A 3-statement model tests whether you can actually link the income statement, balance sheet, and cash flow statement together — not just build three separate tabs that happen to sit next to each other. The real test is whether your balance sheet balances after every assumption change, and whether you can handle the circularity that shows up the moment interest expense depends on a cash balance the model itself is computing.

A DCF tests whether you can build unlevered free cash flow correctly, discount it at a defensible WACC, and handle terminal value without either input silently dominating your entire valuation. Most DCF mistakes aren't arithmetic errors — they're using levered instead of unlevered cash flow, or picking a terminal growth rate that implies an unrealistic long-run return on capital.

A merger model tests whether you can combine two companies' financials into a believable pro forma — allocating purchase price, layering in financing, and phasing in synergies realistically instead of just adding line items together. The hard part is usually the financing structure (how much of the deal is cash, stock, or new debt) and how that mix flows through to pro forma EPS.

A comps analysis tests judgment as much as math — can you pick a genuinely comparable peer set, normalize for one-time items and different fiscal calendars, and choose the right multiple for the industry, rather than mechanically pulling whatever tickers show up in a screener.

An operating model tests whether you can build a forecast from real business drivers — unit volumes, pricing, headcount, occupancy — rather than just growing last year's revenue line by a flat percentage. The skill being tested is connecting operational assumptions to financial outputs in a way that survives someone changing one input and expecting everything downstream to update correctly.

An accretion/dilution model tests whether you understand what actually drives pro forma EPS beyond the surface-level P/E comparison — the financing mix, the synergy phase-in, and the tax treatment of new debt all matter more than most candidates initially assume.

A cap rate bridge tests the core skill of real estate underwriting: walking from gross potential rent down to stabilized NOI through vacancy, credit loss, and operating expenses, then translating that NOI into a purchase price or valuation via a cap rate. Almost every REPE technical interview starts here before moving into a multi-year hold-period model. A real estate–specific concept — shown for Real Estate only.