Finance interview question What¶s a Price/Earning (P/E) ratio and how do you use it?

The estimated P/E of a company is often used to compare current earnings to estimated future earnings. If earnings are expected to grow in the future, the estimated P/E will be lower than the current P/E. This measure is also used to compare one company to another with a forward-looking focus.

How would you explain net present value to non-finance major?

NPVs involve comparing the present value of cash inflows with cash outflows, and calculating each one can get complicated depending on how a company is set up (leveraged or unleveraged) because deciding what to include or exclude and their interactions with tax can get hairy. So, to simplify this discussion on IRR, I ll use Experiments in Finance s NPV calculations to demonstrate.

What is our company¶s stock price? How would you forecast the future stock price for next year?
A company's worth - its total value - is its market capitalization, and it is represented by the company's stock price. Market cap (as it is commonly referred to) is equal to the stock price multiplied by the number of shares outstanding. For example, a stock with a $5 stock price and 10 million shares outstanding/trading is worth $50 million $5 x 10 million) The next logical question is: Who sets stock prices and how are they calculated? In simple terms, the stock price of a company is calculated when a company goes public, an event called an initial public offering. This is when a company will pay an investment bank a lot of money to use very complex formulas and valuation techniques to derive a company's value by determining how many shares will be offered to the public and at what price. For example, a company whose value is estimated at $100 million may want to issue 10 million shares at $10 per share or they may want to issue 20 million at $5 a share.

The number can be positive or negative. This further reduces the balance of reserves and surplus amt in the balance sheet. which other companies can earn.How would you choose to buy a particular stock? & Why might a company choose debt over equity financing? For buying a stock investor must go through firstly for the company's profile that whether it is new one or reputed one. then one should look in the market trend of the stock of the company. In general. liquid assets Cash and other assets (such as accounts receivable. also called net current assets or current capital. as good will is amortized the amount of profits get \reduced. . with little or no loss in value. Why might a company choose debt over equity financing What is working capital? Current assets minus current liabilities. Working capital measures how much in liquid assets a company has available to build its business. Companies with negative working capital may lack the funds necessary for growth. which show the relative strength or weakness of the stock. good customer relations or possession of a unique patent right. In some countries. can say by looking simple moving average index of the stock. How does the goodwill affect net income? Goodwill is the value of reputation of a firm in respect of the profits expected in future over and above the normal rate of return. locational advantage. The impact of goodwill on the net income is that. then an individual should also look for its objective that whether he/she wants to buy high risk n return or balance kind of return of the stock. precious metals (usually gold and silver) are considered also liquid assets. demand and time deposits. Over and above the normal rate implies that the firms capability to earn more profits when compared to other firms because of its good brand name. depending on how much debt the company is carrying. companies that have a lot of working capital will be more successful since they can expand and improve their operations. gilt edged securities) that can be converted into cash in a short time.

resulting from temporary differences . and ability to pay its obligations on time and in full. Temporary differences . What are deferred taxes? Deferred tax is an accounting concept (also known as future income taxes). Temporary differences are differences between the carrying amount of an asset or liability recognized in the balance sheet and the amount attributed to that asset or liability for tax purposes Can you describe a recent situation in which you accomplished an important objective in a brief period of time? What is contingency liability? Contingent liability may be a liability or not will be decided by the future actions of the organisation. meaning a future tax liability or asset.gilt edged security High-grade bond issued by a national (federal) government or an established and stable firm with a long record of consistent earnings. In this case the trader will decide the total liability of tax after the decision is finalised. Such securities used to have gilded edges. that means future actions will decide an activity as liability or not for example : if the government policy regarding taxation is pending the trader is not in a position to decide the exact amount of tax. .

So all costs needed to begin production of a product are fixed costs. how to raise the funds & its allocation in diffrent departments like production.You've been asked to reduce the budget by 8%. FINANCIAL it is an economic activity.Every business process should be analysed in to small segments and each segment should be further divided into procedure and process and from these basic procedure. property and equipment. it involes managing the funds. hr etc Explain fixed cost. . Fixed Cost is the upfront cost a business must front to create an infrastructure. What criteria will you use in identifying the budget reductions? Reducing excess stock. eliminate unworthy area of process and procedure thus by doing this kind of exercise for each area we can reduce our budget with out compromising quality What is the difference between accounts and finance? ACCOUNT is the detailed record of a particular asset. liability. work in progress and reducing the time taken from raw material to finished product I will Concerntrate on weak points of the organisation which are increasing the cost and achieve the same by minimising the same. Fixed costs includes things like plant.CPM Analysis would be the best to reduce the cost I will concentrate on Business Process re-engineering. variable cost and marginal cost? Marginal cost is the change in total cost that arises when the quantity produced changes by one unit. marketing. revenue or expense. owners' equity. SWOT / PERT .

What experience have you had in fixed assets accounting? Fixed asset means it gives long term benefits to the organisation by year end we should find the accurate value of the asset for this purpose we must calculate the depreciation. But in case of land this not happens that is why depreciation is not hcarged on land Can u explain me the flow in General ledger? Or nominal ledger The general ledger is a collection of the group of accounts that supports the value items shown in the major financial statements It will usually include accounts for such items as current assets. ) expenses incurred on shared basis to be charges back to other BUs. revenue and expense items. gains and losses. What is the purpose of chargeback? Purpose of charging back is to assertain the accoutal cost / profit of the perticular unit (when one internal business unit is serving to other BUs like IS service or Consulting service etc. depreciation is charged on assets so that when in future asset will be replace we will have money to purchase new asset.Variable cost refers to cost that may fluctuate during production.. . During production the costs of these inputs may change as the labor and raw materials markets change. In business. The two primary inputs here are labor and raw materials. liabilities. fixed assets. consolidation refers to the aggregation of financial statements of a group company as a consolidated account Why depreciation is not charged on land? Land is such an asset whose value goes on increasing unlike other assets whose value gets reduce over a period of time. it often refers to the mergers and acquisitions of many smaller companies into much larger ones In the context of financial accounting. What is consolidation ? Consolidation or amalgamation is the act of merging many things into one.

This number is specified in the memorandum of association Authorized share capital may be divided into (1) Issued capital: par value of the shares actually issued. normally arise from the purchase of products or services. (2) Paid up capital: money received from the shareholders in exchange for shares. What is Pool rate? What is Authorized share capital? Maximum value of securities that a firm can legally issue. Bills payable: Bill means (An itemized statement of money owed for goods shipped or services rendered). What is the meaning of TDS? How it is charged? Tax deducted on source. that a financial institution must maintain in its reserves. . The outstanding bills (like for instance utility bills etc) yet to be paid. precious metals or other short-term securities. (3) Uncalled capital: money remaining unpaid by the shareholders for the shares they have bought« SLR (STATUTORY LIQUIDITY RATIO) Statutory Liquidity Ratio is the amount of liquid assets.What is Trial Balance? A trial balance is a list of all the nominal ledger (general ledger) accounts Trial balance is nothing but the debit balance must be eqal to credit balance. What is difference between account payable and bills payable? Accounts payable: A debtor's accounts of money he owes. such as cash. Sundry creditors? Credit given 2 different ppl«.

1:self motivation 2:great customer n service skills 3:integrity n trusthworthy 4:Being a team player 5:conflict resolution abilities 6: Optimistic Attitude 7: Ability to Remain Calm Where do you see yourself five years from now? n five years I hope to be working with an employer in an increasingly responsible position." Describe a major goal you've set for yourself recently.Traits of good manager. that enables me to utilize my talents and work closely with my colleagues in solving important problems. Why should we hire you rather than someone else? Tell me something about yourself that I didn't know from reading your resume? . I see myself taking on new and exciting challenges in an enjoyable environment and hopefully this will be with your company. Why do you want to work in this industry? We're considering two other candidates for this position.

we can see how much interest the company has to pay for every dollar it finances What do u you mean by deferred revenue expenditure? The expenditure incured in the primary stage and the benefit of that expenditure arives in the future happenings it is called deffered revenue expenditure. each of which is weighted by its respective use in the given situation. a company can prefer to raise longterm loan because it carries fixed rate of interest. BRS(Bank Reconcillation Statement) Bank reconciliation statement is that statment which is normally carried out in banks taking into consideration the pass book and cash book one of which an a/c holder has with him.and repayment term will be known to the company . It is also defined as the additional interest that is paid by a borrower who has a lower than a satisfactory credit rating WACC-Weighted Average cost of capital WACC stands for weighted average cost of capital WACC is the average of the costs of sources of financing. it remains same even if a company makes high profiy. long term loans. What are debt instrumenta and which instrument is prefered by a company for debt financing? Major debt instruments available are debentures. example: reaserch and developments preliminary expences. By taking a weighted average. mortgage loans etc..Explain credit spread? Credit spread is the difference between the value of two securities which have different prices but similar interest rates and maturities.

What is preference equity? preferance equity is the shares available to the people other than equity share holder or to the owner. . what is mean by fedility funds.dividend is paid to the preferance share holder before the profit is transfer to the equity share holder. Inception date: The date on which something was introduced or started. right issue. Answer Fedility fund: A form of insurance against the loss of money held in trust or on behalf of investors.Re: what is difference between purchases register and purchases books ? purchase register and purchase books are more or less similar but still difference is there purchase register is used to maintain list of purchased items what ever we have purchased that will be registered in the purchase register this purchase register will helps at the time of year ending to find out the outflow of the business. such as a mutual fund. to raise money for the company. in proportion to their holdings. .and stock split.inception date.purchase books are used to maintain the list of credit purchases if we purchased for cash that will be entered in the cash books if it is a credit purchase means that will be entered in the purchase book. Right issue: An offer of additional shares to existing shareholders.

. For example. in a 2 for 1 stock split.Stock split: A stock split occurs when a company releases additional stock in a structured manner without decreasing shareholder equity. an investor who owns 100 shares of a stock valued at $100 per share before the stock split will own 200 shares valued at $50 per share after the split.

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