Answers / Financial Due Diligence
What metrics would you look at first when you open a new FDD databook?
An advanced Financial Due Diligence question — expect it in final rounds and case-heavy interviews (IB, PE, Big-4 Transaction Services).
THE SHORT ANSWER
(1) Revenue trend – growing/declining/flat? (2) EBITDA margin trend – improving/deteriorating? (3) Cash conversion – is EBITDA converting to cash? (4) DSO/DPO/DIO trends – any working capital deterioration? (5) Capex as % of revenue – is the business investing enough? (6) Headcount vs. revenue – is the business getting more efficient? These six metrics give you a quick health check within 15 minutes.
WHAT INTERVIEWERS LISTEN FOR
- ✓Revenue trend
- ✓EBITDA margin trend
- ✓Cash conversion
- ✓Working capital trends
- ✓Capex as % of revenue
COMMON MISTAKES
- ✗Focusing only on revenue growth
- ✗Ignoring cash conversion
- ✗Neglecting working capital metrics
Reading isn't the same as answering under pressure.
Interviewers don't hand you the model answer — you deliver yours on a clock. Practice this and 1,000+ questions with AI feedback on every answer.
RELATED QUESTIONS
- What Excel skills are most important for FDD?
- Walk me through how you'd start analyzing a company you know nothing about.
- What are the key differences between FDD in the US and Germany/DACH?
- How do you handle a carve-out in FDD?
- What is a Vendor Due Diligence (VDD) report and how is it different?
- How do you assess the quality of a company's financial reporting?