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Ares Management Interview Questions
10 past firm prompts from the 65-prompt workbook. Three fully worked examples are open below; use the reveal drill for the rest. No signup.
Recorded roundGroup mappedWorked answers
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Move from credit judgment to the math
The open examples cover accounting presentation, real-estate valuation, and distressed-debt returns.
01First RoundDirect LendingAccounting
Expense versus capitalize R&D
$100 million of R&D - compare the statements when it is expensed versus capitalized, assuming a 25% tax rate.
Expensing lowers current earnings and CFO. Capitalizing creates an asset and moves the cash outflow to investing.
Expense nowPre-tax income falls $100 million, taxes fall $25 million, and net income and cash fall $75 million.
CapitalizeNo full R&D expense hits year-one EBIT. The $100 million cash outflow appears in investing, while only amortization affects earnings over time.
Core differenceCapitalizing raises near-term EBIT, EBITDA, and CFO and creates an intangible asset. Total cash differs only because of tax timing.
Interview check: state the assumed amortization life before quantifying the capitalized case.
02First RoundReal Estate Private EquityCases & Industry
Use cap-rate math
How do cap rates connect net operating income and property value?
Cap rate = NOI / property value, so value = NOI / cap rate.
At a 5% cap rate$5M / 5%$100M property value
At a 6% cap rate$5M / 6%$83.3M property value
Conclusion: a 100-basis-point cap-rate expansion cuts value by about 16.7% in this example.
03First RoundSpecial OpportunitiesDebt & Leveraged Finance
Solve YTM and MOIC
A second-lien bond trades at 90 with a 10% coupon and two years to maturity - what are YTM and MOIC?
The cash flows are -90 today, +10 in year one, and +110 in year two.
Price equation90 = 10 / (1 + y) + 110 / (1 + y)²YTM ≈ 16.25%
Total cash received$10 + $110$120
MOIC$120 / $901.33x
Interview check: MOIC ignores timing; YTM captures when the cash flows arrive.
Keep drilling
Seven more prompts stay closed until you commit to an answer. Round and group labels come from the workbook source, not a fixed interview script.
First RoundDirect LendingDebt & Leveraged Finance
1. What's the difference between a secured loan and an unsecured bond?
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A secured loan has a claim on specific collateral and is usually senior, floating-rate, prepayable, and subject to loan covenants. An unsecured bond relies on the issuer’s general credit, is often fixed-rate with a longer bullet maturity and call protection, and usually carries a higher yield because it ranks behind secured claims on collateral.
First RoundDirect LendingDebt & Leveraged Finance
2. Explain the debt recovery waterfall and define yield to maturity.
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Allocate enterprise value by priority: super-priority and administrative claims, secured claims up to collateral value, priority claims, senior unsecured claims, subordinated debt, preferred equity, then common equity. YTM is the discount rate that sets the present value of all coupon and principal cash flows equal to the bond’s price, assuming it is held to maturity.
First RoundDirect LendingDebt & Leveraged Finance
3. How do interest rates affect private credit?
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Because many private-credit loans are floating-rate, higher base rates increase lender yields but also raise borrower interest expense, weaken coverage, and can increase amendments, PIK usage, non-accruals, and defaults. Lower rates reduce lender yield but improve borrower credit quality and refinancing capacity.
First RoundDirect LendingEV & Equity Value
4. Enterprise value vs. equity value.
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Equity value belongs to common shareholders and equals diluted shares times share price. Enterprise value represents the operating business for all capital providers: equity value + debt + preferred stock + noncontrolling interest - cash and non-operating assets. Pair EV with revenue, EBITDA, EBIT, and UFCF; pair equity value with net income and levered FCF.
First RoundDirect LendingDebt & Leveraged Finance
5. What are the characteristics of a good credit investment and how does it differ from equity?
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Good credit has predictable cash flow, strong free-cash-flow conversion, conservative leverage, solid coverage, seniority or collateral, good documentation, ample liquidity, and a clear repayment path. Credit returns are capped, so the focus is downside protection and loss severity. Equity focuses more on upside from growth and multiple expansion.
First RoundInfrastructureLBO & Private Equity
6. Walk me from EBITDA to levered free cash flow.
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From EBITDA: subtract cash interest, cash taxes, capital expenditures, the increase in net working capital, and mandatory debt repayments. Or start from net income and add back D&A and other non-cash items, then subtract capex, the increase in NWC, and mandatory debt repayments, adding net new borrowing if applicable.
First RoundSpecial OpportunitiesRestructuring
7. Enterprise value of $600, first-lien debt of $350, and second-lien debt of $300 - what are the recoveries?
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First lien receives $350 and recovers 100%. The remaining $250 goes to the $300 second-lien claim, for an 83.3% recovery. Nothing remains for equity.
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