Glossary
Finance recruiting and technical terms.
Plain-English definitions of the terms that come up in finance interviews and on the job. No jargon for jargon's sake.
Private Equity
- Paper LBO
- A simplified leveraged buyout analysis done by hand, without Excel, usually in under ten minutes. Used in PE interviews to test whether a candidate understands LBO mechanics (entry, leverage, growth, debt paydown, exit) well enough to estimate returns quickly.
- MoIC
- Multiple on Invested Capital. The ratio of money returned to money invested (for example, 3.0x means you tripled your investment). A core PE returns metric alongside IRR.
- IRR
- Internal Rate of Return. The annualised return on an investment accounting for the timing of cash flows. PE funds target IRRs typically in the high teens to mid-twenties percent for buyouts.
- PIK Interest
- Payment-In-Kind interest. Interest that accrues and compounds onto the principal rather than being paid in cash. Common in LBO capital structures and a frequent source of confusion because it does not hit cash flow but increases the debt balance.
Recruiting
- On-cycle recruiting
- The compressed, headhunter-coordinated process through which US megafunds and large PE funds hire incoming associates roughly 18 months before the start date. When it kicks off, processes can run from first call to signed offer in 24-72 hours.
- Off-cycle recruiting
- Continuous, role-by-role hiring common at middle-market funds, growth equity and across Europe. Roles open unpredictably and rarely appear on public job boards, so candidates must source proactively through headhunters and networks.
- Superday
- The final round of interviews, typically four to six back-to-back sessions with analysts, associates, VPs and MDs in a single day. Tests technicals, fit and stamina.
- Spring Week
- A short (around one week) insight programme for first-year university students, used to explore divisions and build relationships. A primary feeder into Summer Internship offers.
Hedge Fund
- Variant perception
- The difference between what the market believes about a security and what you believe. It is the core of any investable idea: a view identical to consensus, however well-argued, gives a portfolio manager no reason to act.
- Catalyst
- A specific event expected to force the market to re-rate a security toward your target: an earnings inflection, capital allocation change, management turnover, regulatory decision or spin-off. A thesis without a catalyst risks being a value trap.
Valuation
- Enterprise Value (EV)
- The total value of a business to all capital providers: equity value plus net debt (and other claims like preferred and minority interest). EV is capital-structure neutral, which is why it pairs with metrics like EBITDA.
- Equity Value
- The value attributable to shareholders, equal to share price times shares outstanding (market capitalisation), or enterprise value minus net debt and other non-equity claims.
- DCF
- Discounted Cash Flow. A valuation method that projects a company’s future free cash flows and discounts them to present value at the weighted average cost of capital, plus a terminal value for cash flows beyond the explicit forecast.
- Comparable Companies (Comps)
- A relative valuation method that values a company using trading multiples of similar public companies, such as EV/EBITDA or P/E. Distinct from precedent transactions, which use multiples paid in past M&A deals.
Investment Banking
- Accretion / Dilution
- Whether an acquisition increases (accretive) or decreases (dilutive) the acquirer’s earnings per share. A standard merger-model output and a common technical interview topic.
Want to go deeper? Read the guides or browse the reading list.