Oct 08, 2026 by Offer

Houlihan Lokey Interview Questions 2027: Three Financial Statements & How to Answer

For Houlihan Lokey interview questions like “a company buys a machine with debt,” trace it statement by statement: at purchase, PP&E and debt both rise with no income-statement impact; over time, depreciation lowers net income while interest reduces it further, and cash flow reflects capex and debt movements. This mechanics question is commonly reported by candidates.

What These Houlihan Lokey Interview Questions Assess

This question is commonly reported by candidates interviewing at Houlihan Lokey for 2027 roles. It assesses accounting mechanics under a two-part event: interviewers check you separate the purchase moment from subsequent periods, and that every statement still balances.

How to Answer Houlihan Lokey Interview Questions Like This

Interviewers score technical questions on your process, not just the final answer. State your assumptions first, work through the steps out loud in order, and sanity-check your conclusion at the end.

At purchase: PP&E up and debt up by the machine's cost — cash unchanged (debt funded it), no income-statement effect yet.
Income statement over time: depreciation expense lowers EBIT and net income; interest expense lowers pre-tax income further.
Cash flow statement: the purchase is a capex outflow in investing; debt proceeds are a financing inflow; depreciation is added back to net income.
Balance sheet: PP&E net of accumulated depreciation, debt balance, and retained earnings (reduced by net income effects) all move consistently.
Close by confirming the balance: every change has an offset — that discipline is what interviewers grade.

Example line: "Day one: PP&E and debt both rise by the purchase price — no P&L impact. Going forward, depreciation and interest reduce net income, the cash flow statement shows the capex outflow and financing inflow with depreciation added back, and retained earnings absorb the lower net income. Everything balances."

Common Mistakes in Houlihan Lokey Interview Questions Answers

Claiming the purchase immediately reduces net income.
Forgetting the financing cash inflow from the debt.
Missing that depreciation is non-cash on the cash flow statement.

Two-part accounting questions expose rote memorization fast. Practice separating day-one effects from ongoing effects until it's automatic.

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FAQ

What if the machine were bought with cash instead?

Then cash falls and PP&E rises at purchase — no debt, no interest; the depreciation mechanics stay the same.

Does depreciation affect cash?

No — it's non-cash, added back on the cash flow statement; it only reduces taxable income.

How does the debt affect enterprise value?

Debt is added to equity value to reach enterprise value — keep valuation bridges separate from accounting flows.

What about maintenance vs. growth capex?

A useful nuance: maintenance sustains PP&E while growth capex expands it — mention it if the discussion goes deeper.

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