This glossary explains the most common terms you'll hear in consulting, investment banking and private equity interviews, in plain English. Bookmark it while preparing, and practise using the terms naturally in cases so they become second nature.
Consulting process and interview terms
APD (Advanced Professional Degree): candidates with PhDs, MDs, JDs or similar, often recruited through dedicated tracks.
Candidate-led case: a case where the candidate drives the direction of the analysis.
Case interview / problem-solving interview: an interview where you work through a business problem with an interviewer.
Casey: the name commonly used for BCG's chatbot-led online case assessment.
Exhibit: a chart, table or graph given during a case.
Experience interview: Bain's name for its behavioural interview (format varies by office).
Expertise interview: an interview assessing specialist knowledge for certain roles, for example at McKinsey.
Fit interview: the behavioural part of an interview assessing motivation and personal qualities.
Hypothesis-driven: starting with a likely answer and testing it, rather than analysing everything.
Interviewer-led case: a case where the interviewer sets each question in sequence, as at McKinsey.
Issue tree: a hierarchical breakdown of a problem into its components.
Lilli: McKinsey's internal generative AI platform, piloted in some interviews.
Market sizing / estimation: estimating the size of a market or quantity using logical assumptions.
MBB: McKinsey, BCG and Bain.
MECE: mutually exclusive, collectively exhaustive, meaning buckets that don't overlap and together cover everything.
PEI (Personal Experience Interview): McKinsey's in-depth behavioural interview.
Pyramid principle: communicating the main conclusion first, then supporting arguments.
Solve: McKinsey's game-based online assessment. Its modules have changed over time and are currently reported to include Redrock and Sea Wolf, with a third game in some invitations.
Superday: a final-round day of back-to-back interviews, mainly in banking and finance.
Synthesis: summarising findings into a clear recommendation.
Tier 2 / boutique: consulting firms outside MBB. Boutiques are typically smaller and often specialist.
Business and financial terms
ARR (annual recurring revenue): yearly value of subscription revenue.
Break-even: the point where revenue equals total costs.
CAC (customer acquisition cost): the cost of acquiring one new customer.
Capex (capital expenditure): spending on long-term assets.
Churn: the rate at which customers leave.
Contribution margin: price minus variable cost per unit.
EBIT: earnings before interest and taxes (operating profit).
EBITDA: earnings before interest, taxes, depreciation and amortisation, a proxy for operating cash profit.
Economies of scale: cost advantages from larger output.
Fixed costs: costs that don't change with volume (rent, salaries).
Gross margin: (revenue − cost of goods sold) ÷ revenue.
LTV (lifetime value): the total profit expected from a customer over the relationship.
Market share: a company's sales as a share of total market sales.
Net revenue retention (NRR): revenue from existing customers this period versus last, including expansion and churn.
Operating leverage: how much profit changes with revenue, driven by the fixed cost share.
Payback period: the time to recover an investment.
Percentage point: the absolute difference between two percentages.
Variable costs: costs that change with volume (materials, commissions).
Working capital: current assets minus current liabilities, the cash tied up in operations.
Valuation and banking terms
Accretion/dilution: whether an acquisition increases or decreases the buyer's earnings per share.
Comparable companies (comps): valuation based on multiples of similar listed companies.
DCF (discounted cash flow): valuation based on the present value of future cash flows.
Enterprise value (EV): the value of the whole business to all capital providers.
Equity value: the value attributable to shareholders (EV − net debt and other claims).
Precedent transactions: valuation based on multiples paid in past acquisitions.
Terminal value: the value of cash flows beyond the forecast period.
Unlevered free cash flow: cash flow before interest payments, available to all capital providers.
WACC (weighted average cost of capital): the blended required return of debt and equity holders.
Private equity terms
Add-on acquisition: a smaller acquisition merged into an existing portfolio company.
CIM (confidential information memorandum): a sale document describing a business.
Deleveraging: paying down debt over the holding period, increasing equity value.
Dividend recap: raising new debt to pay a dividend to the owners.
Growth equity: investment, often minority, in growing companies with limited leverage.
IRR (internal rate of return): annualised return on an investment.
LBO (leveraged buyout): acquisition financed substantially with debt.
Leverage: debt used to finance an acquisition, often expressed as a multiple of EBITDA.
MOIC (multiple of invested capital): exit equity ÷ invested equity.
Multiple expansion: selling at a higher valuation multiple than the purchase multiple.
Off-cycle recruiting: PE recruiting that happens year-round as needs arise.
On-cycle recruiting: compressed, headhunter-led PE associate recruiting, usually concentrated over a few days.
Paper LBO: a quick pen-and-paper LBO returns calculation.
PIK (payment-in-kind): interest paid by adding to the loan balance rather than in cash.
Sources and uses: a table showing how a deal is funded and where the money goes.
How do you learn these terms?
Read the definitions, then use each term in a sentence about a real company. Practising cases out loud, for example with caize.ai's AI interviewer, helps the vocabulary become automatic under pressure.
FAQ
Do I need to know all these terms for consulting interviews?
Know the business and consulting terms well. Valuation and PE terms matter mainly for finance roles.
What's the difference between EBIT and EBITDA?
EBITDA adds back depreciation and amortisation. EBIT doesn't.
Is MECE still important?
Yes. Structuring problems into clean, non-overlapping categories is central to case interviews.
What's the difference between IRR and MOIC?
MOIC measures total multiple, while IRR accounts for time.
