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Finance Interview Questions Answers

This document provides sample finance interview questions and answers for entry-level finance roles. It includes questions about the goal of finance, describing a financial model, the main sections of a P&L statement, the three main financial statements, evaluating company financial health, cash vs accrual accounting, and recent events in capital markets. Sample answers are provided for each question to help candidates prepare their responses.

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66 views

Finance Interview Questions Answers

This document provides sample finance interview questions and answers for entry-level finance roles. It includes questions about the goal of finance, describing a financial model, the main sections of a P&L statement, the three main financial statements, evaluating company financial health, cash vs accrual accounting, and recent events in capital markets. Sample answers are provided for each question to help candidates prepare their responses.

Uploaded by

Ela
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Finance Interview Questions & Answers

For Entry-Level Roles


In this document, we’re going to discuss finance interview questions & answers for entry-
level finance roles, like internships or analyst positions.

I’ve included some links below to a few of my other finance videos which I would
recommend studying and understanding:

• How to Build a Basic Financial Model: https://youtu.be/Wws6T9uPVfA


• Cash Flow Statement Explained: https://youtu.be/BS6_RsuqzwE
• Discounted Cash Flow Model: https://youtu.be/Gm0Xn_MidZ8
• Understand Customer Lifetime Value: https://youtu.be/eHi875QuVcA
• Make sure you’re subscribed to my channel: https://bit.ly/EricAndrewsSubscribe

Preparing your mindset:


• The reason we prepare for interviews is not to know every question in advance, it's
to think about why we want to do the role we're interviewing for, and what
experiences in your life led up to this moment.

• These are how I would answer these questions, but it doesn't mean that it is the best
or the only way.

Question 1: What is the goal of finance?


• The core thing finance always does is that it allocates capital.

• To do this, it needs to create many plans and projections about the future, to try to
allocate capital towards the opportunities with the most potential.

• Good opportunities will involve making shareholders money, having employees be


successful, and making the customers happy.
Question 2: Can you describe a financial model? And walk through one you
built.

• Predicts revenues, costs, and expenses to attempt to guess what the future will
look like.
• Chair company (https://youtu.be/Wws6T9uPVfA)

o Units * price = revenue


o Units * manufacturing costs = COGS
o Operating expenses = management labor + marketing
o Operating profit = revenues - costs
o In year with positive profits, we paid taxes, and in years with losses, we
didn’t
o Net income is whatever is left over

Question 3: Walk through main sections of a P&L


• Gross revenue = price * the units we sold
• Less: discounts & refunds
• = Net Revenue: actual money we make
• Less: Cost of Goods Sold: the direct costs that go into the product
• =Gross Profit: the core profitability at the product level
• Less: Operating Expenses: marketing, payroll of management team, and fixed
expenses
• =Operating Profit (EBIT): the overall profit the company makes, before interest and
taxes
• Less: Interest & Taxes
• =Net Income: real profit of the of company, after taxes, and after interest

Question 4: What are the three main financial statements, and what do they
show (basic answer)?

• Income statement: money you make and spend from operations

• Balance sheet: what you own, and what you owe on a given day

• Cash flow statement: how cash comes into and leaves the company, from
operations, investments, and investors
Question 5: How would you evaluate the financial health of a company?
• No exact answer on this one, but I’d start by looking at:

o Cash levels, debt levels, revenue growth increase / decline, net income
positive, and operating cash flow

Question 6: What is cash vs. accrual accounting?


• Accrual accounting is where you match all revenues and expenses on the income
statement with the delivery of products and services, which is called the matching
principle. We usually use accrual accounting on the income statement.
o An example would be that a customer pays for something in January, but
you don’t deliver the service until April, so you don’t recognize the payment
as revenue until April.
• Cash accounting is putting all expenses on the financial statements when the cash
is collected or paid, regardless of when you deliver the service.

Question 7: What's something interesting that has happened in the capital


markets recently?

• The only way you can prep for a question like this is if you’re actually following the
financial news when they ask you this.
• It’s 2020 right now, so as an example I’d say: pandemic hit, tech companies have
taken a huge piece of market share this year in basically every industry as a
consequence of the pandemic and life moving online.

#8: Question to ask employer:


• What is the goal of finance at this company?
• What is something you've done that you are proud of?

I hope you CRUSH this interview! Good luck. Believe in yourself - you are prepared.

Don’t forget to subscribe so you don’t miss future videos:


https://bit.ly/EricAndrewsSubscribe

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