This article contains a comprehensive list of the most popular and frequently asked Financial Analyst interviews questions and answers in 2023.
So if you want to ace your finance interview, it’s expedient you learn how to tackle these questions before the interview day.
This handbook is ideal for anyone interviewing for a position as a financial analyst, and it is based on actual questions answered by worldwide investment banks when making recruiting decisions.
In addition to the frequently asked questions, you will also get guides on being a great financial analyst.
Table of contents
What is the Nature of Financial Analyst Interview Questions?
In Financial Analyst Interview, there are two major categories of questions you should expect:
- Fit Questions
- Technical Questions.
Fit questions, which are also known as behavioral questions, have to do with your ability to work, lead, and think creatively and your personality type.
Preparing for this section of the interview requires you to prepare very well because the questions are critical. The interviewer can make reference to your resume and ask you questions based on the information you have there.
On the other hand, technical questions have to do with specific accounting and finance topics.
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What are the Best Tips I Can Use
In answering any of the finance interview questions, whether fit questions or technical questions, adhering to the tips below will help:
- Ensure you plan your answers and rehearsal how you will respond when asked. Try repeating the question back to the interviewer. This will buy you more time.
- Organize your answers and have a structured approach to answering the questions.
- Avoid using these words “I don’t know.” If you don’t know the exact answer to a question, you can say something else that are relevant instead of going blank.
- Be Logical in your reasoning.
- If possible, try to figure out who your interviewees are and what they bring to the table. By doing that, you can showcase your skills and traits that align with it.
- Research the company you’re applying to. It won’t be bad if you know their mission and vision statement. This information will give you an insight into the company and its culture.
- Use the STAR interview method to structure your responses when responding to behavioral questions. This style follows the framework of scenario, task, action, and result and is a wonderful approach to ensure you present precise proof of the competencies required to be a financial analyst.
- Limit each of your responses to two minutes. Longer replies may turn off an interviewer, giving them more ammunition to pursue you with more difficult questions on the same subject.
Now have gotten the tips that can help you tackle every single question the interview might throw at you, let’s take a look at the most questions you might be faced with if you go for a finance interview.
Top Financial Analyst Interview Questions And Answers
For specific and priority purposes, let’s start with the top four;
#1. Why do you want to be a Financial Analyst?
This is one of the questions your interviewer can’t afford to ask you. Normally, it is believed that there must be a driving factor that motivates you to come for the interview. And they will want to hear your core motivation for pursuing the career.
In fact, your answer to this first question determines the angle they will come from. So, that is why it’s expedient for you to apply smartness when answering this question. You can refer to some of your soft skills and your enthusiasm for the field.
You can say
“I chose a job as a financial analyst because I am a strong problem solver with an analytical attitude. In addition, my attention to detail is ideal for reviewing figures, spotting patterns, and coming up with solutions when anything appears to be wrong. I enjoy the work and recognize the value I can provide to my business by performing well in my position.”
#2. Which other Role would you want to Pursue?
Oftentimes, the interviewer would want to know your further plan. Where you would want to be in 10 years or what you intend to build in the future with your career. They would want to see the bigger picture you have.
You can say…..
“My long-term goal is to acquire a senior analyst position once I’ve gained some experience as a financial analyst. I want to enhance my skills while also honing my leadership abilities, to eventually manage a team of finance professionals. After that, I might go for a job as a treasury manager, controller, or CFO after some experience in management.”
#3. What do you do if you notice a discrepancy in a company’s financial records?
The interviewers may want to know that you will take proper action if you notice something unusual. This question allows them to learn more about how you react to prospective challenges and what you’ll do to deal with them.
You can say…..
“This exact problem arose in my previous position. I discovered a discrepancy between the company’s income statement and some of the other data sources, giving the impression that some money had vanished. I started by looking through the available data to see where the monies might have gone. The data reconciliation was a huge undertaking. I eventually noticed that a record had been copied, resulting in an identical amount of money being taken out twice. This was brought to my supervisor’s attention, and he was able to rectify the revenue statement.”
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#4. As a financial analyst, what skills distinguishes you?
“In my experience, becoming a successful Financial Analyst necessitates acquiring eight essential abilities.
These include the capacity to communicate skills with internal team members and departments, complete, in-depth financial analytical abilities, and an awareness of IT and computer systems.
I also have confident decision-making skills, the ability to assess risk, a detail-oriented approach, and competent mathematical skills.”
Other Financial Analyst Interview Questions & Answers Sample In 2023
Now let’s delve into the other questions that are also commonly asked.
#1. What is the relationship between the income statement and the balance sheet?
Ans: Net income is put back into the business.
#2. Why do increases in accounts receivable result in a cash flow statement cash reduction?
Ans: Because our cash flow statement starts with net income, an increase in accounts receivable is an adjustment to net income to reflect the fact that the monies were never received.
#3. Is it feasible for a corporation to have good cash flows while yet being in serious financial trouble?
Ans: Without a doubt. Two instances are unsustainable improvements in working capital (a corporation disposing of inventory and deferring payables) and a lack of revenues in the pipeline.
#4. How can a corporation have a positive net income but still go bankrupt?
Ans: Two instances are the deterioration of working capital (i.e., increasing accounts receivable while decreasing accounts payable) and financial tricks.
#5. What is the definition of working capital?
Ans: Working capital is defined as current assets minus current liabilities, and it tells the user of the financial statement how much cash is locked up in the business through items like receivables and inventories, as well as how much cash will be needed to pay off short-term obligations in the coming 12 months.
#6. Explain the Cash Flow Statement.
Ans. Begin with net income and work your way down to cash flows from operating activities, making key adjustments along the way (depreciation, changes in working capital, and deferred taxes).
- To get at cash flow from investing activities, mention capital expenditures, asset sales, purchase of intangible assets, and purchase/sale of investment securities.
- To get at cash flow from financing activities, mention repurchase/issuance of debt, equity, and dividend payments.
- Also, the total change of cash is calculated by adding cash flows from operations, cash flows from investments, and cash flows from borrowing.
- You can arrive at the end-of-period cash balance by adding the beginning-of-period cash balance to the change in cash.
#7. What are the examples of Cashflows?
Cashflows include paying salary and taxes.
#8. Why do capital expenditures enhance assets (PP&E), whereas other cash withdrawals result in an income statement expense that diminishes equity via retained earnings?
Ans: Capital expenses are capitalized since the projected benefits of the lemonade business will be realized over a long period of time. On the other hand, employees’ work is only beneficial when salaries are created and should be expensed at that time. This is what distinguishes an asset from a cost.
#9. What is a deferred tax asset, and why would you want to construct one?
Ans: A deferred tax asset emerges when a corporation pays more in taxes to the IRS in a reporting period than it shows as an expense on its income statement.
Deferred tax assets can be created by differences in revenue recognition, expense recognition (such as warranty expense), and net operating losses (NOLs).
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#10. What exactly is a deferred tax liability, and why can one arise?
Ans: A deferred tax liability is an amount recorded on a company’s income statement as a tax cost that is not paid to the IRS in the current quarter but is expected to be paid in the future. It occurs when a firm pays less in taxes to the IRS in a reporting period than they indicate as an expense on their income statement.
Differences in depreciation expense between book reporting (GAAP) and IRS reporting can result in income discrepancies, which can lead to discrepancies in tax expenses recorded in the financial statements and taxes owed to the IRS.
#11. What is goodwill?
Ans: Goodwill is an asset that captures excess of the purchase price over the fair market value of an acquired business.
#12. What is the meaning of the term “cost accounting”?
Cost accounting is the science, art, and practice of cost control and profitability estimation, as well as the presentation of data for managerial decision-making, using costing and cost accounting concepts, methodologies, and techniques.
#13. What do you mean by “adjustment entries”?
Accounting journal entries that shift a company’s accounting records to the accrual basis of accounting are for adjustment entries.
#14. Do you keep track of the stock market? Which stocks, specifically?
Ans. When answering this question, you must be highly cautious. Following the stock market as a financial analyst is advantageous. Also, keep track of the stock market.
#15. What is Net Present Value (NPV)? What is its purpose?
The difference between the present value of cash inflows and the present value of cash withdrawals is the net present value (NPV). In capital budgeting, the net present value (NPV) is used to determine the profitability of a proposed investment or project.
#16. What is the difference between Cash Flow and Free Cash Flow (FCF)?
Ans. Free cash flows (FCF) refers to the cash available for investors after cash operating and investing expenses have been deducted, and it is used to determine a company’s present worth.
On the other hand, cash flow is for determining net cash inflow from the business’s core activities, such as operating, investing, and financing.
Because it incorporates capital expenditure and changes in Net Working Capital, free cash flow aids in determining the business valuation.
#17. What does it mean to have a “composite cost of capital”?
Ans. A composite cost of capital, often known as the weighted average cost of capital (WACC), is a company’s cost of borrowing money.
#18. What does it mean to have a “composite cost of capital”?
Ans. A composite cost of capital, also known as the weighted average cost of capital (WACC), is a company’s cost of borrowing money based on the proportional amounts of each type of debt and equity it has taken on.
#19. Why would you need to do a depreciation calculation?
Ans. Depreciation is a cash flow positive factor. It aids in the reduction of a company’s book value of fixed assets.
#20. What will happen to the cash flow if the accounts receivable increase?
Ans. Cash flow is harmed by a rise in accounts receivable. This refers to clients who have not yet paid for a good, which commonly happens when they buy on credit. The company’s cash flow will only improve if the money is collected.
#21. What does it mean to have a capital structure?
Ans. The capital structure describes how a company finances its overall operations and growth by combining several funding sources.
#22. How can a company benefit from negative working capital?
Ans. When a company’s inventory is low, it might use negative working capital to drive sales growth. To put it another way, a company can make money by selling products to customers before paying bills to suppliers.
#23. Why are Dividends not in income statements?
Ans. Dividends are not operating expenses and have no impact on a company’s net profitability.
#24. If you believe there are any distinctions between NPV and IRR, mention them.
Ans. First and foremost, both are discount-cash flow approaches for evaluating a business’s investments. Internal Rate of Return (IRR) is a percentage-based method for calculating the profitability of future investments, whereas Net Present Value (NPV) is a dollar-based method.
#25. What exactly do you mean when you say “financial benchmarking”?
Ans. Benchmarking is a method of comparing a company’s performance to that of other companies. Financial benchmarking entails doing a financial analysis to determine how efficient a company’s spending is.
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Some Personal Financial Analyst Interview Questions
Let’s take a look at some of the personal questions:
- Tell me about yourself.
- What is your greatest weakness?
- What experience do you have in the Finance field?
- Why did you leave your last job?
- Tell us what you did to improve your Finance knowledge in the last year.
- What have you learned from mistakes on the Finance job?
- What made you choose to apply for Finance…position?
- Tell us the top 3 knowledge/top 3 skills for Finance…position?
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