Top 50 Finance Interview Questions and Answers

If you're looking to land a job in finance, you'll need to be well-prepared for your interview. To help you ace your finance job interviews, we've compiled a list of the top 50 finance interview questions and provided answers to help you impress your potential employers.

10 Basic Finance Technical Interview Questions

1. What are the four financial statements?

The four financial statements are the Income Statement, Balance Sheet, Cash Flow Statement, and Statement of Shareholders' Equity. These statements provide a snapshot of a company's financial performance and help investors and stakeholders understand its financial health.

2. How are the three main financial statements connected?

The three main financial statements—Income Statement, Balance Sheet, and Cash Flow Statement—are connected through the net income figure. The net income from the Income Statement flows into the Balance Sheet as retained earnings, and the cash flow from the Cash Flow Statement impacts the Balance Sheet's cash and cash equivalents.

3. Briefly walk me through the Income Statement.

The Income Statement, also known as the Profit and Loss Statement, shows a company's revenue, expenses, and net income (or loss) over a specific period. It starts with sales, deducts cost of goods sold and operating expenses, and calculates the net income by subtracting interest and taxes.

4. What is EBITDA?

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It measures a company's operating profitability before accounting for interest, taxes, and non-cash expenses like depreciation and amortization. EBITDA is commonly used to evaluate a company's financial performance.

5. What are the ways you can value a company?

There are several methods to value a company, including the discounted cash flow (DCF) method, comparable company analysis, and precedent transactions analysis. DCF estimates a company's intrinsic value based on its projected future cash flows, while comparable company analysis compares a company's financial metrics to those of similar companies. Precedent transactions analysis looks at the prices paid for similar companies in the past.

5 Advanced Finance Technical Interview Questions For Professionals / MBA Candidates

1. What are some possible reasons why a company would issue equity rather than debt to fund its operations?

Some possible reasons why a company would issue equity rather than debt include avoiding high interest payments, maintaining financial flexibility, and reducing financial risk. Equity financing also allows companies to share ownership and potential profits with investors.

2. What are the major factors that drive mergers and acquisitions?

Major factors that drive mergers and acquisitions include the desire to expand market share, achieve economies of scale, enter new markets, acquire intellectual property or technology, and gain access to new customers or distribution channels. M&A can also be driven by the need to diversify risk or respond to competitive pressures.

3. How is it possible for a company to have a positive net income but go bankrupt?

A company can have a positive net income but still go bankrupt if it has high levels of debt and is unable to meet its financial obligations. Net income measures profitability, but it doesn't take into account a company's debt burden or cash flow. If a company is unable to generate enough cash to cover its debt payments, it may become insolvent and file for bankruptcy.

4. How/Why do you lever or unlever beta?

Beta measures a stock's volatility compared to the overall market. Levering beta involves adjusting it to reflect a company's capital structure, taking into account the effect of debt on its risk profile. Unlevering beta, on the other hand, removes the impact of debt to evaluate the inherent risk of a company's operations.

5. What is the difference between cash-based accounting and accrual?

Cash-based accounting records transactions when cash is received or paid, while accrual accounting recognizes revenue when it is earned and expenses when they are incurred, regardless of when cash is received or paid. Accrual accounting provides a more accurate picture of a company's financial performance by matching revenue and expenses to the period in which they occur.

WSO's Free 101 Investment Banking Interview Guide

For more comprehensive finance interview preparation, you can refer to WSO's Free 101 Investment Banking Interview Guide. This guide covers a wide range of interview questions and provides detailed answers and explanations to help you succeed in your finance job interviews.

Additional Resources

In addition to the WSO Interview Prep Guides, there are several other resources available to help you prepare for your finance interviews. These include forums, industry-specific guides, and additional interview resources. Take advantage of these resources to enhance your knowledge and increase your chances of success.

Conclusion

Preparing for a finance interview can be challenging, but with the right knowledge and practice, you can excel and impress your potential employers. Use the top 50 finance interview questions and answers provided in this blog post to prepare yourself and increase your chances of landing your dream finance job.