Top 10 Most Asked
FINANCE INTERVIEW
Questions
Why do you want to work
in finance?
Tip:
Be honest and specific. Talk about what genuinely
excites you about finance.
You might mention your fascination with financial
markets, your passion for analyzing data, or your
desire to help businesses grow and succeed
through sound financial planning.
How do you value a
company?
Tip:
Discuss various methods such as discounted
cash flow (DCF) analysis, comparable company
analysis, and precedent transactions. Explain the
steps involved in each method briefly.
Mention which method might be most
appropriate depending on the company's
industry and stage of growth and highlight the
importance of using multiple methods to get a
more accurate valuation.
Can you explain the three
financial statements and how
they are connected?
Tip:
The three financial statements are the income
statement, balance sheet, and cash flow
statement.
The income statement shows profitability, the
balance sheet shows the company’s financial
position at a point in time, and the cash flow
statement shows the inflows and outflows of
cash.
Net income from the income statement affects
the balance sheet (retained earnings) and the
cash flow statement.
What key financial ratios would
you use to evaluate a company's
performance?
Tip:
Mention key ratios like the current ratio for
liquidity, debt-to-equity ratio for leverage, return
on equity (ROE) for profitability, and price-to-
earnings (P/E) ratio for valuation.
Briefly explain that each ratio provides insights
into different aspects of a company's financial
health.
What is EBITDA and why is
it important?
Tip:
EBITDA stands for Earnings Before Interest,
Taxes, Depreciation, and Amortization.
It is important because it shows a company's
operational profitability by excluding non-
operational expenses.
This makes it easier to compare companies'
performance without the impact of financing and
accounting decisions.
What is working capital
and why is it important?
Tip:
Working capital represents the difference
between a company’s current assets (like cash,
inventory, and accounts receivable) and its
current liabilities (such as accounts payable and
short-term debt).
It is a measure of a company's operational
efficiency and short-term financial health.
What is WACC, and how do
you calculate it?
Tip:
WACC, or Weighted Average Cost of Capital, is a
metric used to estimate the cost of a company's
capital.
It represents the average cost a company expects
to pay to finance its assets, taking into account
the relative weights of each component of the
capital structure (debt and equity).
How do interest rates
affect the economy?
Tip:
Explain that interest rates influence consumer
and business spending, borrowing costs,
inflation, and economic growth.
Higher rates can reduce spending and slow down
an overheating economy, while lower rates can
boost spending and investment, encouraging
economic growth.
What is the time value of
money (TVM)?
Tip:
TVM is the concept that money available now is
worth more than the same amount in the future
due to its earning potential.
Discuss the importance of TVM in investment
decisions, using concepts like present value (PV)
and future value (FV).
What does negative
working capital mean?
Tip:
Negative working capital means that a company's
current liabilities exceed its current assets.
This situation indicates potential liquidity issues
and may suggest that the company relies heavily
on short-term financing to meet its obligations
and fund its operations.
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Harshal Jamdhade
