Finance Interview Questions and Sample

Answers
A comprehensive guide to HR and technical interview questions for finance roles, with sample answers for entry-
level positions in private equity, asset management, and investment banking.

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HR Interview Questions

1 2

Walk me through your resume. Why do you want to work in finance?

Provide a brief summary of your education, experience, Discuss your interest in investing, value creation, and
and key achievements. Tailor it to highlight finance- working with portfolio companies.
Express your passion for finance, interest in markets,
and how your background aligns with the role.

3 4

Why private equity? Why asset management?

Discuss your interest in investing, value creation, and Talk about your interest in portfolio construction, risk
working with portfolio companies. management, and helping clients achieve financial goals.

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More HR Interview Questions
1 How do you prepare for a finance interview? 1 What are your strengths and weaknesses?

Use the STAR method: describe a situation, task, action, Strength: detail-oriented. Weakness: perfectionism,
and result. Practice behavioral questions, follow market managed by setting realistic goals.

2 Tell me about a time you worked under 2 Where do you see yourself in 5 years?
pressure.
Growing within finance, taking on leadership roles, and
Describe a situation, your actions, and the outcome. contributing to impactful transactions.

3 Tell me about a time you solved a complex

problem.

Highlight critical thinking, creativity, and outcome.

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Financial Statements and Valuation Basics

Three Financial How They Link Together EBITDA

Statements
Net income from the Income Earnings Before Interest, Taxes,
Income Statement, Balance Sheet, Statement flows into the Balance Depreciation, and Amortization. A
and Cash Flow Statement. Sheet (retained earnings) and proxy for operating performance.
Cash Flow

Enterprise Value Equity Value

Market value of equity + debt + minority interest + Market capitalization = stock price times number of
preferred shares - cash. shares.

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Private Equity Concepts

Private Equity Firm Target Company

Banks / Lenders Post-Acquisition Capital

When discussing a recent deal you found interesting, be prepared to explain the transaction rationale, deal structure, and your perspective on why it was notable.

1 2 3

What is a leveraged buyout (LBO)? What makes a good LBO candidate? PE vs. VC
Acquisition of a company using a significant amount of borrowed Predictable cash flows, low capital expenditures, strong asset PE invests in mature companies; VC invests in early-stage
money. base, and potential for operational improvements. Describe the startups.
transaction, explain rationale, deal structure, and your
perspective.
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Valuation Methods and Risk Assessment
How do you assess risk in an investment?

Analyze financials, industry trends, management quality, and macroeconomic factors.

Terminal Value Calculation

Using perpetuity growth method or exit multiple method.

What is a multiple?

A ratio such as EV/EBITDA or P/E used to compare companies.

Interest Rates and Valuations

Higher rates increase discount rates, lowering valuations.

DCF Model
Company Valuation Methods Project free cash flows, calculate terminal value,
Capital Structure discount using WACC, and sum to get enterprise value.
Using DCF, Comparable Company Analysis, and
Mix of debt and equity used to finance a company's
Precedent Transactions.
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Asset Management Concepts

WACC Calculation Investment Banks in IPOs Portfolio Performance Evaluation

Weighted average cost of capital = cost of equity × % equity + cost of debt Pricing shares, marketing, and distributing shares to investors. Metrics like alpha, Sharpe ratio, and compare against benchmarks.
× % debt × (1 - tax rate).

Mutual Funds vs. Hedge Funds Asset Allocation

Mutual funds are open to retail investors; hedge funds are less regulated and target high-net-worth individuals. Process of dividing investments across asset classes to balance risk and return.

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Market Analysis and Performance Metrics
Sharpe Ratio Interest Rates Impact Alpha and Beta
Measures risk-adjusted They impact valuations, asset Alpha: excess return vs
return: (portfolio return - risk- allocation, and portfolio benchmark. Beta: a volatility
free rate) / standard deviation. rebalancing. relative to market.

Staying Updated on Markets Role of an Asset Manager

Read Bloomberg, Financial Times, follow analysts, and Allocate capital, oversee investments, optimize returns,
track economic indicators. and align with investment goals.

Capital structure is the mix of debt and equity used to finance a company's operations and growth. Understanding this
concept is crucial for both investment analysis and corporate finance roles.

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Private Equity Performance Metrics

IRR (Internal Rate of Return) IRR Calculation in LBO

IRR is the annualized rate of return earned over a period of time. In private IRR is the discount rate that makes the net present value of cash flows
equity, it reflects the time value of money and is used to evaluate (including exit proceeds) equal to the initial investment.
profitability of deals. A higher IRR indicates a more attractive investment.

Metric Definition Example

DPI (Distributed to Paid-In Capital) Measures how much capital has been returned If investors contributed ₹100 crore and received
to investors relative to what they've contributed. ₹80 crore in distributions, DPI = 0.8.

Gross MOIC Ratio of total value to original capital invested If gross MOIC is 3.0, but after deducting fees,
before fees and carry. expenses, and carried interest, it reflects the
actual

Net MOIC Similar to Gross MOIC but after deducting fees, It reflects the actual returns to LPs.
expenses, and carried interest.

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Advanced PE Concepts and Terms

TVPI RVPI
TVPI shows the unrealized portfolio value plus RVPI shows the unrealized portion of investment
realized distributions relative to capital invested. value relative to capital invested. RVPI captures the
TVPI provides a snapshot of overall Fund asset value growth that LPs have not received yet.
performance.

Catch-Up Clause
Hurdle Rate
A catch-up clause allows GPs to receive their
The hurdle rate is the minimum rate of return a
carried interest once LPs have received their
fund must achieve before GPs can earn carried
preferred return, until the agreed profit split is
interest. It ensures LPs get a baseline return first.
achieved. Example: After LPs receive an 8%
Typical Range: 8%.
preferred return, GPs can 'catch up' to 20% carry.

Carried Interest Gross IRR vs. Net IRR

Carried Interest is the GP's share of profits from successful investments, usually Gross IRR: Return before all fees and deductions, reflecting portfolio
around 20% of returns above performance.
Net IRR: Return after all fees and deductions, reflecting actual LP returns.

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