A corporate-banking interview case becomes clearer when the memo answers a repayment question before it describes the client relationship. This original fictional case asks you to separate a profitable business from a cash shortfall. It is a practice exercise, not a bank credit decision or a claim about an employer’s assessment.
The borrower and the request
An industrial borrower requests a term facility for equipment. All figures below are millions and refer to the same annual period. EBIT is 12; depreciation is 3; cash taxes are 3; capital spending is 5; working-capital investment is 4. Scheduled interest is 2 and principal is 2. Ignore other cash items for this simplified exercise.
| Bridge item | Amount | Reason |
|---|---|---|
| EBIT | 12 | Starting operating earnings, before interest |
| Add depreciation | 3 | Non-cash expense under this simplified bridge |
| Subtract cash taxes | 3 | Cash outflow supplied in the case |
| Subtract capex | 5 | Investment required by the scenario |
| Subtract working-capital investment | 4 | Cash absorbed in operations |
| Cash before debt service | 3 | 12+3−3−5−4 |
| Interest plus scheduled principal | 4 | 2+2 |
Cash coverage is 3/4=0.75×. Do not compare EBIT with interest and assume that the result answers the principal-repayment question. The calculation depends on the stated definition, period and omissions; an actual agreement can define coverage differently.
Write the memo in five parts
- Purpose: state what is financed, the use of funds and the requested term.
- Repayment: show the cash bridge and the payment dates; identify the primary repayment source.
- Downside: identify the operational assumption that could make the shortfall worse.
- Missing facts: request the information that would change the conclusion.
- Next step: explain what you would analyze before proposing a structure.
Fictional opening: “The equipment investment supports operating capacity, but the supplied annual cash bridge provides 3 against 4 of scheduled debt service. I would verify recurring capital spending and working-capital needs before treating the borrower’s positive EBIT as repayment capacity.” This is more useful than an unsupported approve/decline label.
Ask questions that can change the answer
Is all capex recurring, or is a portion associated with the new equipment? When are receivables collected? Is the working-capital build seasonal or permanent? What existing maturities compete for cash? Are payment dates aligned with the cash cycle? Which information is verified and which is a forecast?
Do not improve the answer by declaring capex discretionary without evidence. If a lower-spending scenario would impair the business, it is not automatically a sustainable repayment case. Collateral, guarantees and refinancing may be relevant, but they do not make the original cash bridge disappear.
Practice the client explanation
Explain the mismatch in three sentences: the financing purpose, the cash issue and the next information request. Use plain terms before ratios. Then explain how a change in collections would flow into cash and why a longer maturity may change payment timing but does not by itself create operating cash.
The OCC commercial-loans handbook provides general supervisory context for repayment, working-capital and term lending. JPMorganChase’s corporate-banking program describes work with corporate bankers and product partners; it does not certify this exercise as an interview requirement.
Use the corporate-banking interview preparation guide for a broader readiness check, compare credit-analyst preparation, and use the corporate-banking resume guide to describe your actual contribution. Paid study material is optional; it cannot turn a fictional exercise into deal experience.
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