Financial Planning And Analysis Interview Questions And Answers Pdf – We have compiled a list of the most common and frequently asked financial interview questions. If you want to ace your finance interview, make sure you master the answers to the challenging questions below. This guide is perfect for anyone interviewing for a financial analyst job and is based on real questions asked of global investment banks to make hiring decisions.
Along with this comprehensive guide to finance interview questions (and answers), we recommend you also read our guide on how to be a great financial analyst, where we break down the ‘analyst trifecta’.
Financial Planning And Analysis Interview Questions And Answers Pdf
#1 Behavioral and fit questions are more about soft skills like ability to work with a team, leadership, commitment, creative thinking and overall personality type. It is essential to be prepared for these types of questions, and the best strategy is to choose 5-7 examples of specific situations from your resume that you can use as examples of leadership, teamwork, weakness, hard work, problem solving etc. Q. To help you approach this aspect of the interview, we’ve created a separate guide to behavioral interview questions.
Cleaner Interview Questions [updated 2023]
#2 Technical questions are related to specific accounting and finance topics. This guide focuses exclusively on technical finance interview questions.
The balance sheet shows a company’s assets, liabilities, and equity (in other words: what it owns, what it owes, and its net worth). The income statement accounts for the company’s revenues, expenses, and net income. The statement of cash flows shows cash inflows and outflows from three areas: operating activities, investing activities, and financing activities.
If I could use only one statement to assess the overall health of a company, which statement would I use and why?
Money is king. The cash flow statement gives a true picture of how much money the company is generating. Ironically, it often gets the least attention. You can probably choose a different answer for this question, but you need to provide a good justification (for example, the balance sheet because assets are the real driver of cash flow; or the income statement because it shows a company’s earning power and profitability over a uniform basis of commitments).
Accounting Interview Questions To Ask
This is somewhat subjective. A good budget is one that has buy-in from all departments of the company, is realistic but achievable, is risk-adjusted to allow for a margin of error, and is connected to the company’s overall strategic plan. To achieve this, the budget must be an iterative process that includes all departments. It can be zero-based (starting from scratch every time) or building on the previous year, but it depends on the type of business you’re running, which approach is better. It’s important to have a good budgeting/planning calendar that everyone can follow.
A company should always optimize its capital structure. If he has taxable income, he can benefit from the fiscal shield of debt issuance. If the company has steady cash flows and is able to make the required interest payments, it might make sense to issue debt if it lowers the company’s weighted average cost of capital.
WACC (weighted average cost of capital) is calculated by taking the percentage of debt to total capital, multiplied by the interest rate on debt, multiplied by one minus the effective tax rate, plus the percentage of equity to capital, multiplied by the required value. Return on equity. Learn more in CFI’s Free Guide to Understanding WACC.
Debt is cheaper because it is paid before equity and has collateral backing it. Debt comes before equity when the business is liquidated. There are pros and cons to debt versus equity financing that a business needs to consider. It is not automatically better to use debt financing simply because it is cheaper. A good answer to this question can highlight the trade-offs if a follow-up is necessary. Learn more about cost of debt and cost of equity.
Scenario Based Interview Questions For Business Analyst
A company has learned that, thanks to a new accounting rule, it can start capitalizing research and development costs instead of expensing them.
It is not affected – however, the cash taxes may be different due to changes in depreciation expense and therefore the cash flow may be slightly different.
Constant – except for cash tax impact/time impact on net present value (NPV) of cash flows.
It is important to have strong financial modeling principles. Whenever possible, model assumptions (inputs) should be in one place and colored distinctly (banking models typically use blue font for model inputs). Good Excel models also make it easy for users to understand how inputs translate into outputs. Good models also include error checks to ensure the model is working correctly (eg balance sheet balances, cash flow calculations are correct, etc.) They contain enough detail, but not too much, and have a dashboard that clearly displays key results with charts and graphs. For more, see CFI’s Complete Guide to Financial Modeling.
Finance Interview Questions And Answers
Nothing. This is a tricky question – only the balance sheet and cash flow statements are affected by the stock purchase.
Working capital is usually defined as current assets minus current liabilities. In banking, working capital is normally more narrowly defined as current assets (excluding cash) minus current liabilities (excluding interest-bearing debt). It is sometimes defined even more narrowly as accounts receivable plus inventory minus accounts payable. By knowing all three definitions, you can give a very thorough answer.
Negative working capital is common in some industries, such as retail and restaurants. For a grocery store, customers pay upfront, inventory moves relatively quickly, but suppliers often give 30-day (or longer) credit. This means that the company receives money from customers before it needs money to pay suppliers. Negative working capital is a sign of efficiency in businesses with low inventory and accounts receivable. In other situations, negative working capital can signal that a company is experiencing financial problems if it does not have enough cash to pay current liabilities.
If the purchase will be used in the business for more than one year, it is capitalized and depreciated according to the company’s accounting policies.
How To Answer The Interview Question “what Are Your Career Goals?” (with Examples)
There are basically four areas to consider when accounting for property, plant and equipment (PP&E) on the balance sheet: (i) original purchase, (ii) depreciation, (iii) additions (capital expenditures), and (iv) dispositions. In addition to practice, you may also need to consider re-evaluation. For many businesses, PP&E is the primary capital asset that generates revenue, profitability and cash flow.
This is a classic financial interview question. In the balance sheet, the inventory asset account is reduced by the amount of the reduction, just like the equity. The income statement is hit with an expense in each cost of goods sold (COGS) or a separate line item for the amount of the discount, reducing net income. In the statement of cash flows, depreciation is added back to cash from operating activities because it is a non-cash expense (but does not need to be counted twice in non-cash working capital changes). Read more about an inventory write-up.
There are many reasons why companies go through M&A: to achieve synergies (cost savings), to enter new markets, to gain new technology, to eliminate a competitor, and because it is “accretive” to financial parameters. Learn more about accumulation/dilution in M&A.
[Note: Social factors are also important, but you need to be careful to mention them depending on who you are interviewing. These include ego, empire building, and to justify higher executive compensation.]
How To Answer
This is one of the big financial interview questions. Take a step back and provide a high-level overview of the company’s current financial position or the position of companies in the industry in general. Highlight something in each of the three financial statements.
This was CFI’s guide to funding interview questions and answers. We have also published many other types of interview guides. The best way to do well in interviews is to practice, so we recommend reading the most frequently asked questions and answers below to make sure you’re ready for anything!
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The decision to move an interview with
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