Name: - Mayuri Gade

Roll no: - 19028

Frequently asked Finance (Interview based) Questions:

1. What is GDP?
Gross domestic product (GDP) is one of the most common indicators used to track
the health of a nation's economy. The calculation of a country's GDP takes into
consideration a number of different factors about that country's economy, including
its consumption and investment.

2. What is difference between Sensex and Nifty?

Nifty and Sensex are two of the major stock market indices in India. The key
difference between Sensex and Nifty is that Nifty is designed to measure the
performance of 50 top companies, while Sensex has been designed to measure the
performance of 30 well-established companies.

3. How do you define the Net worth of a company?

Net worth is the value of the assets a person or corporation owns, minus
the liabilities they owe. It is an important metric to gauge a company's health,
providing a useful snapshot of its current financial position.

4. What is the basic difference between a Balance Sheet & Profit and Loss
Statement?
The balance sheet summarises the financial position of a company for a specific
point in time. The P&L (profit and loss) statement shows revenues and expenses
during a set period.

5. What is a Contingent liability?

A contingent liability is a liability that may occur depending on the outcome of an
uncertain future event. A contingent liability is recorded if the contingency is likely
and the amount of the liability can be reasonably estimated.

6. What is the difference between Nominal and Real GDP?

The main difference between nominal GDP and real GDP is the adjustment for
inflation. Since nominal GDP is calculated using current prices, it does not require
any adjustments for inflation.

7. What is the difference between Inflation and Deflation?

Inflation occurs when the prices of goods and services rise, while deflation occurs
when those prices decrease.
8. What is GDP at Purchasing Power Parity?
GDP PPP is gross domestic product converted to international dollars using
purchasing power parity rate. Purchasing Power Parity are the rates of currency
conversion that eliminate the differences in price levels between countries.

9. What is Interest Rate Parity?

Interest rate parity is a theory that suggests a strong relationship between interest
rates and the movement of currency values.

10. What is Fiscal Deficit?

Fiscal deficit is termed as the difference between the total revenue and total
expenditure of a government in a financial year. The condition of fiscal deficit arises
when the expenditure of a government is more than the revenue generated by the
government in a given fiscal year.

11. What is CRR?

Cash Reserve Ratio (CRR) is the share of a bank’s total deposit that is mandated by
the Reserve Bank of India (RBI) to be maintained with the latter in the form of liquid
cash.

12. What is SLR?

Statutory Liquidity Ratio is the money a commercial bank needs to preserve in the
form of cash, or gold or government authorized securities (Bonds) before
providing credit to their own customers

13. What is Monetary Policy?

Monetary policy is the policy adopted by the monetary authority of a nation to

control either the interest rate payable for very short-term borrowing (borrowing
by banks from each other to meet their short-term needs) or the money supply,

14. What is the difference between Repo and Reverse Repo Rate?

Repo rate is nothing, but the price at which the Reserve Bank of India gives some
money as loan to the banks, while reverse repo is the cost at which money is taken
by RBI from commercial bank. It is this rate that is responsible for controlling the
inflation.

15. What is the Capital Adequacy Ratio?

Capital adequacy ratio (CAR) is a specialized ratio used by banks to determine the
adequacy of their capital keeping in view their risk exposures.
16. What is a Money Market?
Monetary policy is the process by which the monetary authority of a country
controls the supply of money, often targeting a rate of interest for the purpose of
promoting economic growth and stability.

17. What is a Capital Market?

A capital market is a financial market in which long-term debt (over a year)
or equity-backed securities are bought and sold.

18. What is a Call Money Market?

The call money market is an essential part of the Indian Money Market, where the
day-to-day surplus funds (mostly of banks) are traded.

19. What is a Scheduled Commercial Bank?

The scheduled commercial banks are those banks which are included in the second
schedule of RBI Act 1934 and which carry out the normal business of banking such
as accepting deposits, giving out loans and other banking services.
e.g. Andhra Bank, Bank of Baroda, Bank of India, Bank of Maharashtra, Canara Bank,
etc.

20. What is an IPO?

Initial public offering is the process by which a private company can go public by
sale of its stocks to general public. After IPO, the company's shares are traded in an
open market.

21. What is GNP?

Gross National Product (GNP) is the total value of all finished goods and services
produced by a country's citizens in a given financial year, irrespective of their
location.

22. What is Recession?

Recession is a slowdown or a massive contraction in economic activities. A
significant fall in spending generally leads to a recession.

23. What is Debt to Equity Ratio?

The debt-to-equity (D/E) ratio is calculated by dividing a company’s total liabilities
by its shareholder equity. These numbers are available on the balance sheet of a
company’s financial statements.

24. What is Inventory Turnover Ratio?

Inventory turnover ratio is an accounting ratio that establishes a relationship
between the revenue cost, more commonly known as the cost of goods sold and
average inventory carried during the period. It is also called a stock turnover ratio.
25. What is Current Ratio?
The current ratio is a liquidity ratio that measures a company's ability to pay short-
term obligations or those due within one year.

26. What is Debt Service Coverage Ratio?

Debt service coverage (DSCR) is the ratio between Net Operating Income and Total
Debt Service and helps in determining whether the company is capable of covering
its debt obligations with the net income it generates.

27. What is Interest Coverage Ratio?

The interest coverage ratio is a debt ratio and profitability ratio used to determine
how easily a company can pay interest on its outstanding debt.

28. What is PEG Ratio?

The price/earnings to growth ratio (PEG ratio) is a stock's price-to-earnings (P/E)
ratio divided by the growth rate of its earnings for a specified time period. The PEG
ratio is used to determine a stock's value while also factoring in the company's
expected earnings growth.

29. What is acid test Ratio?

The acid-test ratio uses a firm's balance sheet data as an indicator of whether it has
sufficient short-term assets to cover its short-term liabilities. The acid-test ratio is
also commonly known as the quick ratio.

30. What is Fiscal Deficit?

Fiscal deficit is termed as the difference between the total revenue and total
expenditure of a government in a financial year. The condition of fiscal deficit arises
when the expenditure of a government is more than the revenue generated by the
government in a given fiscal year.

31. What is Debt to GDP ratio?

The debt-to-GDP ratio is a simple way of comparing a nation's economic output (as
measured by gross domestic output) to its debt levels..

32. What is Financial Intermediation?

Financial intermediation is a productive activity in which an institutional unit incurs
liabilities on its own account for the purpose of acquiring financial assets by
engaging in financial transactions on the market.

33. What is Net Interest Margin?

Net interest margin (NIM) is a measurement comparing the net interest income a
financial firm generates from credit products like loans and mortgages, with the
outgoing interest.
 34. Why is RBI known as the lender of last resort?
RBI is known as the lender of last resort because RBI comes to help banks in times
of crisis

35. What is Dividend Discount Model (DDM)?

Dividend Discount Model, also known as DDM, in which stock price is calculated
based on the probable dividends that will be paid and they will be discounted at the
expected yearly rate.

36. Walk me through a ‘cash flow statement.’

Start with net income, go line by line through major adjustments (depreciation,
changes in working capital and deferred taxes) to arrive at cash flows from
operating activities.

 Mention capital expenditures, asset sales, purchase of intangible assets, and

purchase/sale of investment securities to arrive at cash flow from investing
activities.

 Mention repurchase/issuance of debt and equity and paying out dividends to arrive
at cash flow from financing activities.

 Adding cash flows from operations, cash flows from investments, and cash flows
from financing gets you to total change of cash.

 Beginning-of-period cash balance plus change in cash allows you to arrive at end-of-
period cash balance.

37. Is it possible for a company to have positive cash flow but still be in serious
financial trouble?
Absolutely. Two examples involve unsustainable improvements in working capital
(a company is selling off inventory and delaying payables), and another example
involves lack of revenues going forward in the pipeline.

38. What do you think is the best evaluation metric for analyzing a company’s
stock?
The price-to-earnings ratio (P/E ratio) is a metric that helps investors determine the
market value of a stock compared to the company's earnings. In short, the P/E ratio
shows what the market is willing to pay today for a stock based on its past or future
earnings.

39. What is ‘working capital’?

Working Capital is basically an indicator of the short-term financial position of an
organization and is also a measure of its overall efficiency. Working Capital is
obtained by subtracting the current liabilities from the current assets.
 40. What is the difference between a journal and a ledger?
 Main difference between journal and ledger is that; the business transactions are at
first recorded in the journal and then these transactions are permanently posted in
the ledger.
 The Journal is a subsidiary book, whereas Ledger is a principal book.
 Debit and Credit are columns in the journal, but in the ledger, they are two opposite
sides.
 In the journal, narration must be written to support the entry. On the other hand, in
the ledger, there is no requirement of narration.

41. What is NPV? Where is it used?

Net present value (NPV) is the difference between the present value of cash inflows
and the present value of cash outflows over a period of time. NPV is used in capital
budgeting and investment planning to analyze the profitability of a projected
investment or project.

42. What is IRR?

Internal rate of return (IRR) is a capital budgeting measurement used by companies
to determine the profitability of a potential investment or project based on
predicted cash flows.

43. What is Yield to Maturity(YTM)

Yield to maturity (YTM) is the total return anticipated on a bond if the bond is held
until it matures. Yield to maturity is considered a long-term bond yield but is
expressed as an annual rate.

44. How many financial statements are there? Name them

There are four main financial statements. They are:
 Balance Sheet
 Income Statement
 Cash Flow Statement
 Statement of Shareholders Equity

45. Do you follow the stock market? Which stocks in particular?

Yes I do follow the stock market, I like to follow Axis mutual fund particularly

46. What is a ‘Weighted Average Cost of capital’?

A firm’s Weighted Average Cost of Capital (WACC) represents its blended cost of
capital across all sources, including common shares, preferred shares, and debt.
47. What is ‘Capital structure’?
The capital structure is the particular combination of debt and equity used by a
company to finance its overall operations and growth.

48. What is a ‘Goodwill’?

Goodwill is an asset that captures excess of the purchase price over the fair market
value of an acquired business.

49. What is EPS and how is it calculated?

EPS is Earnings per Share of the company. This is calculated for the common
stockholders of the company. It is the per share earnings of the company.
Formula:-
EPS = (Net Income – Preferred Dividends) / weighted average number of shares
outstanding during the year.

50. What are the Different types of EPS?

 Reported EPS or GAAP EPS.
 Ongoing/Pro Forma EPS.
 Carrying Value/Book Value EPS.
 Retained EPS.
 Cash EPS.

51. What is a difference between Futures Contract and Forwards Contract?

The main difference between forward and futures contracts is that futures contracts
are traded on exchanges and forwards are traded over-the-counter.

52. What are the three major types of Mutual Funds?

 Equity Funds
 Debt Funds
 Hybrid Funds

53. Describe WACC and its components

The weighted average cost of capital (WACC) is the rate that a company is
expected to pay on average to all its security holders to finance its assets. The
WACC is based on a business firm's capital structure.
WACC=(E/V)*Re+(D/V)*Rd*(1-Tc)
Re = Cost of equity
Rd = Cost of debt
E = Market value of the firm’s equity
D = Market value of the firm’s debt
V = E + D = Total market value of the firm’s financing
E/V = Percentage of financing that is equity
D/V = Percentage of financing that is debt
 Tc = Corporate tax rate

54. Describe P/E Ratio

The price-to-earnings ratio (P/E ratio) is the ratio for valuing a company that
measures its current share price relative to its per-share earnings (EPS). The price-
to-earnings ratio is also sometimes known as the price multiple or the
earnings multiple.

55. What are Stock Options?

A stock option gives an investor the right, but not the obligation, to buy or sell a
stock at an agreed upon price and date.

56. What is DCF method?

DCF analysis is used to calculate the company’s current value based on its future
cash flows. It is a more academic approach.
In theory, an opportunity for investment should be considered where the cost of
investment is less than the DCF value.

57. What is a Stock Split and Stock Dividend?

A stock dividend is the payment of additional shares of stock to common
stockholders. It involves making a transfer from the retained earnings account to
the other stockholders’ equity accounts.

58. What is a Rights Issue?

A rights issue is when a company offers its existing shareholders the chance to buy
additional shares for a reduced price. Usually the discounted price will stand for a
specified time frame, after which it is returned to normal.

59. What is Depreciation. Give a list of different methods used for estimating
depreciation
Depreciation is the accounting process of converting the original costs of fixed
assets such as plant and machinery, equipment, etc into the expense. It refers to the
decline in the value of fixed assets due to their usage, passage of time or
obsolescence.
The most common depreciation methods include:
 Straight-line
 Double declining balance
 Units of Production
 Sum of years digits

60. What are Accruals?

The accounting and bookkeeping term accruals refers to adjustments that must be
made before a company's financial statements are issued.
61. What is the difference between Reserves and Provisions?
Reserves and provisions are somewhat alike but are created for different reasons
and under distinct circumstances. Both are important for a business and one can’t
reduce the importance of the other.

62. What is Deferred Revenue Expenditure?

Deferred Revenue Expenditure is an expense which is incurred while accounting
period. And the result and benefits of this expenditure are obtained over the
multiple years in the future.