Frequently asked Finance Interview Questions

While there are as many different possible finance interview questions as there are interviewers, it
always helps to be ready for anything. Based on my industry experience, I have tried to prepare a list
of potential interview questions. Will MBA Finance fresher student face them all or will they face a
few? I cannot say but based on my experience, most of the interview questions will be out of these
listed questions.

Before we get to these questions, here are few interview best practices to keep in mind when
getting ready for the final day.

Be ready with the technical questions. Many students erroneously think that if they are not finances
major, then technical questions do not apply to them. On the other hand, interviewers want to be
assured that students going into the field are committed to the work they’ll be doing for the next
few years, especially as many finance firms will devote considerable resources to mentor and
develop their new employees.

Keep each of your answers limited to 2 minutes. Longer answers may lose an interviewer, while
giving them additional ammunition to go after you with more complicated question on the same
topic.

A. General Questions:-
1. Tell me about yourself - People tend to meander through their whole resumes and
mention personal or irrelevant information in answering--a serious no-no. Keep your
answer to a minute or two at most. Cover four topics: early years, education, work
history, and recent career experience. Emphasize this last subject. Remember that
this is likely to be a warm-up question. Don't waste your best points on it. And keep
it clean--??No weekend activities should be mentioned.
2. What knowledge do you have about our company?
3. What are your strengths and weaknesses?
4. What is the difference between Deemed University and normal university and what
is the concept of coop training.

B. Technical Questions:-
1. What are the 3 golden rules of accounts? Tell me the names of accounts along with
rules
i. Real Account - Debit what comes in and credit what goes out
ii. Personal Account - Debit the receiver and credit the giver
iii. Nominal Account - Debit all expenses and losses and credit all gains and
profits
2. What is the difference between provisions and reserve? Explain with some
example.
i. Provisions are created for known liabilities whereas reserves are created for
unknown liabilities or general purpose. For example provision for bad debts.
ii. Reserve is created against the charge of the profit and loss appropriation
account. Provision is created against the charge of the profit and loss
account.
 iii. Main objective of reserve is to strengthen the financial position and to meet
future unknown losses and liabilities. Objective of provision is to meet
known losses and liabilities the amount of which is not certain.
iv. Reserve is shown on debit side of profit and loss appropriation account and
liabilities side of balance sheet. Provision is shown on debit side of profit and
loss account and assets side of balance sheet as deduction from the
concerned asset.
v. Reserve is created when there is enough profit in the business. Provision is
created even if there is loss in the business.
vi. Reserve can be distributed to shareholders as dividend. Provision cannot be
distributed as dividend to shareholders.
vii. Reserve is created without considering the future requirement of the
business. Provision is created by estimating the future requirement of the
business.
3. What do you understand by accrual concept in accounting? Explain the accounting
entries by giving some example
i. Business transactions are recorded when they occur and not when the
related payments are received or made. This concept is called accrual
basis of accounting and it is fundamental to the usefulness of financial
accounting information. Accounting standards strictly require accounting
on accrual basis. However, there is an alternative called cash basis of
accounting. Under the cash basis events are recorded based on their
underlying cash inflows or outflows. Cash basis is normally used while
preparing financial statements for tax purposes, etc.
Examples:
ii. An airline sells its tickets days or even weeks before the flight is made, but it
does not record the payments as revenue because the flight, the event on
which the revenue is based has not occurred yet.
iii. An accounting firm obtained its office on rent and paid $120,000 on January
1. It does not record the payment as an expense because the building is not
yet used. While preparing its quarterly report on March 31, the firm
expensed out three months' rent i.e. 30,00 [$120,000/12*3] because 3
months equivalent of time has expired.
iv. A business records its utility bills as soon as it receives them and not when
they are paid, because the service has already been used. The company
ignored the date when the payment will be made.
Entry:
While creating the accruals -
P&L Account Dr
To accrual a/c
While making the payment/recording expense or income
Expense account (Telephone) Dr
To accrual a/c
4. Provision for Bad Debts Meaning
i. Provision for bad debts is the estimated percentage of total doubtful debt
that needs to be written off during the next year. It is nothing but a loss to
 the company which needs to be charged to the profit and loss account in the
form of provision. It is done on the reason that the amount of loss is
impossible to ascertain until it is proved bad.
i. Please note that Debts can be classified into three categories which are as
under:-
ii. Bad Debts: It means which are uncollectable or irrecoverable debts.
iii. Doubtful debts: It means which will be receivable or cannot be ascertainable
at the date of preparing the financial statements, in simple words those
debts which are doubtful to realize.
iv. Good debts: It means which are not bad, i.e., neither there is the possibility
of bad debts nor any doubt about its realization is known as good debts
v. Journal Entries in Case of Bad Debt and Provision

In the First Year

 For Bad debts

 For provision for bad debts journal entries

In the Second/Subsequent Year

 For Bad Debts

 For Provision for Bad Debts Journal entries (If a

new provision is more than old)
Example #2
M/s X Ltd. has a trade receivable of Rs. 10000 from M/s
KBC as on 31.12.2018. Recently, a receivable owing to Rs.
1,000 to M/s X Ltd has been wound up. Consequently, M/s
X Ltd. does not expect and amount to be recovered from
M/s KBC.
Based on past experience, M/s X Ltd. estimates that 3% of
its receivable will do the default in making the payments.
M/s X should write off Rs. 1,000 from M/s KBC as bad
debts. Please provide the journal entries to be made for
bad debt. Note that provision for bad debts as on
31.12.2017 is Rs. 100.
The entries shall be made as under:-

(An allowance of Rs. 270 (i.e. (Rs. 10,000 – Rs. 1000) * 3%)
should be made. A provision of Rs. 100 has already been
created earlier. Therefore, only Rs. 170 shall be charged to
the income statement. )
5. Issuing of bonds of 100 at discount at 10%
i. Cash Account Dr 90
ii. Discount on bonds Dr 10
1. To bond 100
iii.
6. What are prepaid expenses?
i. Prepaid expenses are future expenses that have been paid in advance. You
can think of prepaid expenses as costs that have been paid but have not yet
been used up or have not yet expired.
ii. The amount of prepaid expenses that have not yet expired are reported on
a company's balance sheet as an asset. As the amount expires, the asset is
reduced and an expense is recorded for the amount of the reduction. Hence,
the balance sheet reports the unexpired costs and the income statement
reports the expired costs. The amount reported on the income statement
should be the amount that pertains to the time interval shown in the
statement's heading.
iii. A common prepaid expense is the six-month premium for insurance on a
company's vehicles. Since the insurance company requires payment in
advance, the amount paid is often recorded in the current asset account
Prepaid Insurance. If the company issues monthly financial statements, its
income statement will report Insurance Expense that is one-sixth of the
amount paid. The balance in the account Prepaid Insurance will be reduced
by the amount that was debited to Insurance Expense.
Example
ABC LTD pays advance rent to its landowner of $10,000 on 31st December
2010 in respect of office rent for the following year. ABC LTD has an
accounting year end of 31st December 2010. ABC LTD will recognize an asset
of $10,000 in the financial statements of year 2010 in respect of the prepaid
expense to recognize its right to use office space in the following year.
Following accounting entry will be recorded in the books of ABC LTD in the
year 2010:

Prepaid Rent Dr 10,000

To cash 10,000
The prepaid expense will be recognized as expense in the next accounting
period to which the rental expense relates. Following accounting entry will
be recorded in the year 2011:

Rent Expense (Income statement) Dr 10,000

To Prepaid Rent 10,000
7. Explain deferred expenditures. How are these expenses dealt with in profitability
statement?
i. Deferred Revenue Expenditure is revenue expenditure, incurred to receive
benefits over a number of years say 3 or 5 years. These expenses are neither
incurred to acquire capital assets nor the benefits of such expenditure is
received in the same accounting period during which they were paid. Thus
they don’t affect profitability statement as they are not transferred to the
profitability statement in the period during which they are paid for. They are
charged to profit and loss account over a number of years depending upon
the benefit accrued.
8. What do you understand by depreciation and under which depreciation method,
the value of asset will become zero.
i. Depreciation is a systematic and rational process of distributing the cost of
tangible assets over the life of assets. Depreciation is a process of allocation.
ii. Cost to be allocated = acquisition cot - salvage value
iii. Allocated over the estimated useful life of assets.
iv. Under Straight line method, the value of the asset will become zero whereas
under diminishing balance method, the value will never become zero.

Entry

Depreciation a/c (P&L) Dr

To Accumulated Depreciation a/c (BS)

9. Accounting entry for outstanding salary

i. (Being salary due for the month of March)

Salary Account Dr

To Outstanding Salary Account

ii. (Being salary paid)

Outstanding Salary Account Dr

To Bank/Cash

10. What do you understand by capital expenditure and how they are different from
revenue expenditure?
i. A capital expenditure is an amount spent to acquire or improve a long-term
asset such as equipment or buildings. Usually the cost is recorded in an
account classified as Property, Plant and Equipment. The cost (except for the
cost of land) will then be charged to depreciation expense over the useful
life of the asset.
ii. A revenue expenditure is an amount that is expensed immediately—
thereby being matched with revenues of the current accounting period.
Routine repairs are revenue expenditures because they are charged directly
to an account such as Repairs and Maintenance Expense. Even significant
repairs that do not extend the life of the asset or do not improve the asset
(the repairs merely return the asset back to its previous condition) are
revenue expenditures
11. Walk me though a cash flow statement.
i. A cash flow statement is a financial report that describes the sources of a
company's cash and how that cash was spent over a specified time period. It
does not include non-cash items such as depreciation. This makes it useful
for determining the short-term viability of a company, particularly its ability
 to pay bills. Because the management of cash flow is so crucial for
businesses and small businesses in particular, most analysts recommend
that an entrepreneur study a cash flow statement at least every quarter.
ii. The cash flow statement is similar to the income statement in that it records
a company's performance over a specified period of time. The difference
between the two is that the income statement also takes into account some
non-cash accounting items such as depreciation. The cash flow statement
strips away all of this and shows exactly how much actual money the
company has generated. Cash flow statements show how companies have
performed in managing inflows and outflows of cash. It provides a sharper
picture of a company's ability to pay creditors, and finance growth.
iii. It is perfectly possible for a company that is shown to be profitable
according to accounting standards to go under if there isn't enough cash on
hand to pay bills. Comparing amount of cash generated to outstanding debt,
known as the "operating cash flow ratio," illustrates the company's ability to
service its loans and interest payments. If a slight drop in a company's
quarterly cash flow would jeopardize its ability to make loan payments, that
company is in a riskier position than one with less net income but a stronger
cash flow level.
iv. Cash flow statements classify cash receipts and payments according to
whether they stem from operating, investing, or financing activities. A cash
flow statement is divided into sections by these same three functional areas
within the business:
1. Cash from Operations—this is cash generated from day-to-day
business operations.
2. Cash from Investing—cash used for investing in assets, as well as the
proceeds from the sale of other businesses, equipment, or other
long-term assets.
3. Cash from Financing—cash paid or received from issuing and
borrowing of funds. This section also includes dividends paid.
(Although it is sometimes listed under cash from operations.)
4. Net Increase or Decrease in Cash—increases in cash from previous
year will be written normally, and decreases in cash are typically
written in (brackets).
12. What is working capital
i. A measure of both a company's efficiency and its short-term financial health.
The working capital is calculated as:
ii. Working Capital = Current Assets – Current Liabilities
iii. The working capital ratio (Current Assets/Current Liabilities) indicates
whether a company has enough short term assets to cover its short term
debt. Anything below 1 indicates negative W/C (working capital). While
anything over 2 means that the company is not investing excess assets. Most
believe that a ratio between 1.2 and 2.0 is sufficient.Also known as "net
working capital".
13. Is it possible for a company to show positive cash flows but be in grave trouble?
 i. 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.
14. Is it possible for a company to show positive net income but go bankrupt?
i. Two examples include deterioration of working capital (i.e. increasing
accounts receivable, lowering accounts payable), and financial shenanigans.
15. What is a deferred tax liability and why might one be created?
i. Deferred tax liability is a tax expense amount reported on a company’s
income statement that is not actually paid to the IRS in that time period, but
is expected to be paid in the future. It arises because when a company
actually pays less in taxes to the IRS than they show as an expense on their
income statement in a reporting period.
ii. Differences in depreciation expense between book reporting (GAAP) and
IRS reporting can lead to differences in income between the two, which
ultimately leads to differences in tax expense reported in the financial
statements and taxes payable to the IRS.
16. What is a deferred tax asset and why might one be created?
i. Deferred tax asset arises when a company actually pays more in taxes to the
IRS than they show as an expense on their income statement in a reporting
period.
ii. Differences in revenue recognition, expense recognition (such as warranty
expense), and net operating losses (NOLs) can create deferred tax assets
17. Define the Bank reconciliation.
i. Bank reconciliation is a process performed by a company to ensure that the
company's records (check register, general ledger account, balance sheet,
etc.) are correct and that the bank's records are also correct.
ii. The bank reconciliation for a company's checking account begins with the
company noting the balance per the bank statement and then making some
notations about that balance. For example, the balance on the bank
statement is probably not the amount that appears in the company's
records. In all likelihood the checks written by the company in the days
immediately before the date of the bank statement will not have cleared
(been deducted from) the checking account. These are called outstanding
checks. Another possibility is that the company received money on the
closing date of the bank statement and properly recorded the amount in its
records. However, the money was deposited into the bank too late in the
day and will appear on the next bank statement. This is known as a deposit
in transit
18. What are the reasons which cause pass book of the bank and your bank book not
tally?
i. * Cheques deposited into the bank but not yet collected
ii. * Cheques issued but not yet presented for payment
iii. * Bank charges
iv. * Amount collected by bank on standing instructions of the concern.
v. * Amount paid by the bank on standing instructions of the concern.
 vi. * Interest debited by the bank
vii. * Interest credited by the bank
viii. * Direct payment by customers into the bank account
ix. * Dishonour of cheques
x. * Clerical errors
19. What is the difference between accounts receivable (AR) and accounts payable
(AP)?
i. Accounts payable are amounts a company owes because it purchased goods
or services on credit from a supplier or vendor. Accounts receivable are
amounts a company has a right to collect because it sold goods or services
on credit to a customer. Accounts payable are liabilities. Accounts receivable
are assets.
ii. Let's assume that Company A sells merchandise to Company B on credit.
(Perhaps the invoice states that the amount is due in 30 days.) Company A
will record a sale and will also record an account receivable. Company B will
record the purchase (perhaps as inventory) and will also record an account
payable.
20. What do you understand by contingent liabilities? Where do we show them in
balance sheet?
i. A contingent liability is a potential liability...it depends on a future event
occurring or not occurring. For example, if a parent guarantees a daughter's
first car loan, the parent has a contingent liability. If the daughter makes her
car payments and pays off the loan, the parent will have no liability. If the
daughter fails to make the payments, the parent will have a liability.
ii. If a company is sued by a former employee for $500,000 for age
discrimination, the company has a contingent liability. If the company is
found guilty, it will have a liability. However, if the company is not found
guilty, the company will not have an actual liability.
iii. In accounting, a contingent liability and the related contingent loss are
recorded with a journal entry only if the contingency is both probable and
the amount can be estimated.
iv. If a contingent liability is only possible (not probable), or if the amount
cannot be estimated, a journal entry is not required. However, a disclosure
is required.
v. When a contingent liability is remote (such as a nuisance suit), then neither
a journal nor a disclosure is required.
vi. Contingent Liability is shown as foot note in the balance sheet
21. What do you understand by Time Value of Money
i. The time value of money tells us that receiving cash today is more valuable
than receiving cash in the future. The reason is that the cash received today
can be invested immediately and will begin growing in value. For instance, if
a company receives $1,000 today and it is invested at 8% per year, the
company will have $1,080 after 365 days.
ii. A time value of money of 8% per year also tells us that receiving $1,080 one
year from now is comparable to receiving $1,000 today. With a time value of
 money of 8% per year, accountants will state that receiving $1,080 in one
year has a present value of $1,000.
iii. In accounting, a time value of money of 8% means that a company
performing services today in exchange for cash of $1,080 in one year has
earned $1,000 of service revenues today. The $80 difference will become
interest income as the company waits 365 days for the money.
iv. The time value of money is important in accounting because of the cost
principle and the revenue recognition principle. However, materiality and
cost/benefit allow the accountants to ignore the time value of money for its
routine accounts receivable and accounts payable having credit terms of 30
or 60 days
22. What do you mean by IRR and NPV
i. The internal rate of return is the interest rate that will discount an
investment's future cash amounts so that the sum of the present values will
be equal to cash paid at the beginning of the investment. In capital
budgeting, the internal rate of return is also the interest rate that results in
an investment having a net present value of zero. To illustrate, let's assume
that a company is considering an investment that will provide net cash
inflows of $1,000 at the end of each year for five years. The amount of cash
that the company must pay at the beginning of the investment is $3,600.
Someone will need to compute the interest rate that will discount the five
$1,000 future cash receipts so that their present value at the time of the
investment will equal $3,600. Through software or through trial and error,
you will find that the internal rate of return on this investment is
approximately 12%. The internal rate of return is one of the tools in capital
budgeting that considers the time value of money and also considers all of
the cash payments and cash receipts during the life of an investment.
ii. NPV is the acronym for net present value. Net present value is a calculation
that compares the amount invested today to the present value of the future
cash receipts from the investment. In other words, the amount invested is
compared to the future cash amounts after they are discounted by a
specified rate of return. For example, an investment of $500,000 today is
expected to return $100,000 of cash each year for 10 years. The $500,000
being spent today is already a present value, so no discounting is necessary
for this amount. However, the future cash receipts of $100,000 for 10 years
need to be discounted to their present value. Let's assume that the receipts
are discounted by 14% (the company's required return). This will mean that
the present value of the those future receipts will be approximately
$522,000. The $522,000 of present value coming in is compared to the
$500,000 of present value going out. The result is a net present value of
$22,000 coming in. Investments with a positive net present value would be
acceptable. Investments with a negative net present value would be
unacceptable.
 iii. Internal rate of return and net present value are discounted cash flow
techniques. To discount means to remove the interest contained within the
future cash amounts.
iv. If the net present value of an investment or project is more than $0, the
project is earning more than the interest rate used to discount the future
cash amounts. If the net present value of a project is less than $0, the
project is earning less than the interest rate used to discount the future cash
amounts. If the present value of a project is exactly $0, the project is earning
exactly the interest rate used to discount the future cash amounts. In other
words, if a project has an internal rate of return of 15%, and you discount
the project's future cash amounts by 15%, the project's net present value
will be exactly $0.
23. What if 2 companies have the same value of P/E ratios, which company does you
think is better?
i. A company with a higher EPS,, OR RATE OF RETURN
24. What is Break Even Point? What does it signify?
i. An analysis to determine the point at which revenue received equals the
costs associated with receiving the revenue. Break-even analysis calculates
what is known as a margin of safety, the amount that revenues exceed the
break-even point. This is the amount that revenues can fall while still staying
above the break-even point
25. What are the methods of preparing Cash Flow statement?
i. Direct Cash Flow Method - The direct method adds up all of the cash
payments and receipts, including cash paid to suppliers, cash receipts from
customers, and cash paid out in salaries. This method of CFS is easier for
very small businesses that use the cash basis accounting method.These
figures can also be calculated by using the beginning and ending balances of
a variety of asset and liability accounts and examining the net decrease or
increase in the accounts. It is presented in a straightforward manner.
ii. Indirect Cash Flow Method - With the indirect method, cash flow is
calculated by adjusting net income by adding or subtracting differences
resulting from non-cash transactions. Non-cash items show up in the
changes to a company’s assets and liabilities on the balance sheet from one
period to the next. Therefore, the accountant will identify any increases and
decreases to asset and liability accounts that need to be added back to or
removed from the net income figure, in order to identify an accurate cash
inflow or outflow.

Changes in accounts receivable (AR) on the balance sheet from one

accounting period to the next must be reflected in cash flow:

If AR decreases, more cash may have entered the company from customers
paying off their credit accounts—the amount by which AR has decreased is
then added to net earnings. An increase in AR must be deducted from net
earnings because, although the amounts represented in AR are in revenue,
they are not cash.
26. What are the types of cash flow statement?
i. Cash Flows From Operations (CFO) - Cash flow from operations (CFO), or
operating cash flow, describes money flows involved directly with the
production and sale of goods from ordinary operations. CFO indicates
whether or not a company has enough funds coming in to pay its bills or
operating expenses. In other words, there must be more operating cash
inflows than cash outflows for a company to be financially viable in the long
term. Operating cash flow is calculated by taking cash received from sales
and subtracting operating expenses that were paid in cash for the period.
Operating cash flow is recorded on a company's cash flow statement, which
is reported both on a quarterly and annual basis. Operating cash flow
indicates whether a company can generate enough cash flow to maintain
and expand operations, but it can also indicate when a company may need
external financing for capital expansion.
Note that CFO is useful in segregating sales from cash received. If, for
example, a company generated a large sale from a client, it would boost
revenue and earnings. However, the additional revenue doesn't necessarily
improve cash flow if there is difficulty collecting the payment from the
customer.
ii. Cash Flows From Investing (CFI) - Cash flow from investing (CFI) or investing
cash flow reports how much cash has been generated or spent from various
investment-related activities in a specific period. Investing activities include
purchases of speculative assets, investments in securities, or the sale of
securities or assets. Negative cash flow from investing activities might be
due to significant amounts of cash being invested in the long-term health of
the company, such as research and development (R&D), and is not always a
warning sign.
iii. Cash Flows From Financing (CFF) - Cash flows from financing (CFF), or
financing cash flow, shows the net flows of cash that are used to fund the
company and its capital. Financing activities include transactions involving
issuing debt, equity, and paying dividends. Cash flow from financing
activities provide investors with insight into a company’s financial strength
and how well a company's capital structure is managed.
27. What is the accounting treatment of Retained Earnings?
i. Retained Earnings (RE) are the accumulated portion of a business’s profits
that are not distributed as dividends to shareholders but instead are
reserved for reinvestment back into the business. Normally, these funds are
used for working capital and fixed asset purchases (capital expenditures) or
allotted for paying off debt obligations.
ii. Retained Earnings are reported on the balance sheet under the
shareholder’s equity section at the end of each accounting period. To
calculate RE, the beginning RE balance is added to the net income or
reduced by a net loss and then dividend payouts are subtracted. A summary
report called a statement of retained earnings is also maintained, outlining
the changes in RE for a specific period.
 iii. RE = Beginning Period RE + Net Income/Loss – Cash Dividends – Stock
Dividends
28. What is the purpose of doing Cash reconciliation?
i. The main goal of reconciling your cash is to ensure that the recorded
balance of your business and the recorded balance of the bank statement
match up. A cash reconciliation process helps organizations to spot any
discrepancies, so they can identify where the ledger and statement are
failing to match
29. What are Open-end and closed end investments?
i. A closed-end fund has a fixed number of shares offered by an investment
company through an initial public offering. Open-end funds (which most of
us think of when we think mutual funds) are offered through a fund
company that sells shares directly to investors
ii. Mutual funds are open-end funds. New shares are created whenever an
investor buys them. They are retired when an investor sells them back.
iii. Closed-end funds issue only a set number of shares, which then are traded
on an exchange.
iv. Closed-end funds are considered a riskier choice because most use leverage.
That is, they invest using borrowed money in order to multiply their
potential returns.
30. What do you understand about Mutual Funds
i. A mutual fund is a type of financial vehicle made up of a pool of money
collected from many investors to invest in securities like stocks, bonds,
money market instruments, and other assets. Mutual funds are operated by
professional money managers, who allocate the fund's assets and attempt
to produce capital gains or income for the fund's investors. A mutual fund's
portfolio is structured and maintained to match the investment objectives
stated in its prospectus.
ii. Mutual funds give small or individual investors access to professionally
managed portfolios of equities, bonds, and other securities. Each
shareholder, therefore, participates proportionally in the gains or losses of
the fund. Mutual funds invest in a vast number of securities, and
performance is usually tracked as the change in the total market cap of the
fund—derived by the aggregating performance of the underlying
investments
iii. Mutual funds pool money from the investing public and use that money to
buy other securities, usually stocks and bonds. The value of the mutual fund
company depends on the performance of the securities it decides to buy. So,
when you buy a unit or share of a mutual fund, you are buying the
performance of its portfolio or, more precisely, a part of the portfolio's
value. Investing in a share of a mutual fund is different from investing in
shares of stock. Unlike stock, mutual fund shares do not give its holders any
voting rights. A share of a mutual fund represents investments in many
different stocks (or other securities) instead of just one holding.
31. What do you know about Private Equity?
 i. Private equity is an alternative investment class and consists of capital that
is not listed on a public exchange. Private equity is composed of funds and
investors that directly invest in private companies, or that engage in buyouts
of public companies, resulting in the delisting of public equity.
ii. Private equity (PE) is ownership or interest in an entity that is not publicly
listed or traded. A source of investment capital, private equity (PE) comes
from high-net-worth individuals (HNWI) and firms that purchase stakes in
private companies or acquire control of public companies with plans to take
them private and delist them from stock exchanges.
iii. The private equity (PE) industry is comprised of institutional investors such
as pension funds, and large private equity (PE) firms funded by accredited
investors. Because private equity (PE) entails direct investment—often to
gain influence or control over a company's operations—a significant capital
outlay is required, which is why funds with deep pockets dominate the
industry.
32. What is portfolio?
i. A portfolio is a collection of financial investments like stocks, bonds,
commodities, cash, and cash equivalents, including closed-end funds and
exchange traded funds (ETFs). People generally believe that stocks, bonds,
and cash comprise the core of a portfolio. Though this is often the case, it
does not need to be the rule. A portfolio may contain a wide range of assets
including real estate, art, and private investments.
ii. You may choose to hold and manage your portfolio yourself, or you may
allow a money manager, financial advisor, or another finance professional to
manage your portfolio.
iii. One of the key concepts in portfolio management is the wisdom of
diversification—which simply means not to put all your eggs in one basket.
Diversification tries to reduce risk by allocating investments among various
financial instruments, industries, and other categories. It aims to maximize
returns by investing in different areas that would each react differently to
the same event. There are many ways to diversify. How you choose to do it
is up to you. Your goals for the future, your appetite for risk, and your
personality are all factors in deciding how to build your portfolio.
33. What are hedge Funds
i. Hedge funds pool money from investors and invest in securities or other
types of investments with the goal of getting positive returns. Hedge funds
are not regulated as heavily as mutual funds and generally have more
leeway than mutual funds to pursue investments and strategies that may
increase the risk of investment losses. Hedge funds are limited to wealthier
investors who can afford the higher fees and risks of hedge fund investing,
and institutional investors, including pension funds.
34. What is NAV (Net Asset Value)
i. "Net asset value," or "NAV," of an investment company is the company's
total assets minus its total liabilities. For example, if an investment company
has securities and other assets worth $100 million and has liabilities of $10
 million, the investment company's NAV will be $90 million. Because an
investment company's assets and liabilities change daily, NAV will also
change daily. NAV might be $90 million one day, $100 million the next, and
$80 million the day after.
35. What do you understand by Corporate finance
i. Corporate finance is concerned with how businesses fund their operations in
order to maximize profits and minimize costs. It deals with the day-to-day
operations of a business' cash flows as well as with long-term financing goals
(e.g., issuing bonds).
36. Why would a company issue stock rather than debt to finance its operations?
i. Since equity financing is a greater risk to the investor than debt financing is
to the lender, the cost of equity is often higher than the cost of debt.
37. Who is a more senior creditor, a stockholder or a bondholder?
i. The bondholder is always more senior. Stockholders (including those
who own preferred stock) must wait until bondholders are paid during a
bankruptcy
38. What is TMT ?

TMT Investment Banking Definition: In TMT investment banking, professionals advise technology,
media, and telecom companies on raising debt and equity and completing mergers, acquisitions, and
asset sales.
The two broad categories outside of tech are telecom and media/entertainment.
Banks group these industries because they’re all related:
 Media/Entertainment: These companies produce content and earn money via
advertising, subscriptions, or one-time sales.
 Telecom: These companies deliver the content via wireless and wireline (e.g., voice and
fiber optics) services.
 Technology: These firms provide the software, hardware, and services to consume the
content following its delivery.
Increasingly, TMT companies operate across multiple categories.
For example, AT&T started as a telecom company, but then it acquired Time Warner to enter the
media business.
But then it changed its mind and decided to spin off WarnerMedia and merge it with Discovery.
Netflix started as a technology company but has increasingly become a media/entertainment
company as it has produced original content.
Finance concepts-

Cashflow statement, working capital,IRR, NPV, bad debts, AUM, bonds, Deabantures, deferred
revenue, EPS, all accounting ratios, Accounts receivable & Payable, WACC, Leverage, Depreciation -
Types, Fictitious assets, Amortisation, Journal entries, Ledger, Journal , Trial Balance , NAV -
Calculation, Hedge funds & mutual funds, Golden rules,Hedging, Arbitrage process

-What is Private Equity

-What is a Private Equity Fund

-How is a Private Equity fund different from a Hedge fund and Mutual Fund
-What is a PE Fund Life cycle

-What are GPs and LPs. How are they different from each other

-What is leverage buyout

-Explain the alternative asset class

-What are some of the ways

Blackstone makes money

-Read about Blackstone and General Accounting basics.

Q) What are Blackstone's business lines

Blackstone is a leading investment firm that provides asset management,

advisory, and financial services to institutional investors and high-net-
worth individuals. The company operates in several business lines,
including private equity, real estate, hedge fund solutions, credit, and
insurance.

In the private equity business line, Blackstone invests in companies and

provides strategic guidance to help them grow and succeed. The
company's real estate business line invests in properties and manages
them on behalf of investors. In hedge fund solutions, Blackstone provides
customized solutions and advisory services to hedge fund clients. In
credit, the company provides financing solutions to companies and
investors, including leveraged loans and mezzanine debt. Lastly, in the
insurance business line, Blackstone invests in life insurance and annuities.

Overall, Blackstone's business lines are designed to meet the diverse

investment needs of its clients and to generate strong returns through
strategic investments and value creation.

Q) What is a cash flow statement?

A cash flow statement is a financial statement that summarizes the cash and
cash equivalents entering and leaving a company during a specific period of
time, typically a month or a quarter. It provides information about the operating,
investing, and financing activities of a company and shows how changes in
balance sheet accounts affect a company's cash and cash equivalents. The cash
flow statement is important because it helps investors, analysts, and other
stakeholders evaluate a company's ability to generate cash and manage its cash
flow effectively.
Capital Market : Capital market refers to the financial market where long-term
securities such as stocks, bonds, and other financial instruments are traded. It is
a market where companies and governments can raise funds by issuing
securities to investors. Capital markets play a crucial role in facilitating the flow
of capital from investors who have surplus funds to those who need funds for
long-term investments. This market is divided into two main components: the
primary market, where securities are issued for the first time, and the secondary
market, where these securities are traded among investors. The capital market
provides an important source of funding for businesses and governments, and
helps to allocate capital efficiently to promote economic growth.

mutual funds: Mutual funds are investment vehicles that pool money from
multiple investors to invest in various financial assets such as stocks, bonds, and
other securities. A mutual fund is managed by a professional fund manager who
makes investment decisions based on the investment objective of the fund. The
profits or losses from the investments are shared among the investors in
proportion to their investment in the fund. Mutual funds offer diversification,
professional management, and liquidity to investors who do not have the time,
expertise, or resources to manage their own investments.

NPV stands for Net Present Value, which is a financial metric used to calculate
the present value of future cash flows. It takes into account the time value of
money and discount rate to determine the present value of expected cash flows
over a specified period. A positive NPV indicates that an investment is expected
to generate returns higher than the cost of capital, while a negative NPV
indicates that the investment may not be profitable. It is commonly used in
capital budgeting and investment decision-making processes.

Deferred revenue is a liability account that represents advance payments a

company receives from its customers for goods or services that have not yet
been delivered or earned. It arises when a company receives payment from a
customer for products or services that it has not yet delivered or earned, and it is
recorded as a liability until the products or services are provided. Once the
products or services are delivered or earned, the deferred revenue is recognized
as revenue on the income statement. Deferred revenue is also known as
unearned revenue.

Deferred income, also known as unearned income or advance payments,

refers to the money that a company receives in advance from customers
for goods or services that are yet to be provided. The company is
obligated to deliver the goods or services at a later date, and until then,
the revenue is considered unearned and is recorded as a liability on the
balance sheet.

The accounting entry for deferred income involves crediting a liability

account and debiting a cash account. For example, if a company receives
$10,000 in advance for a service it will provide in the future, the journal
entry will be:
Debit: Cash account - $10,000 Credit: Deferred income account - $10,000

When the goods or services are delivered, the liability account is reduced,
and the corresponding revenue account is increased by the same amount.
This process continues until all the advance payments are recognized as
revenue, and the deferred income balance on the balance sheet becomes
zero.

Hedge funds are investment funds that pool capital from accredited individuals
or institutional investors and use a variety of investment strategies to generate
high returns. These strategies can include both traditional and alternative
investments, such as long/short equity, event-driven, distressed debt, global
macro, and many others. Unlike mutual funds, hedge funds typically have fewer
regulatory restrictions and can use leverage and derivatives to amplify returns.
They also typically charge higher fees, often taking a percentage of profits as
well as a management fee. Hedge funds are generally considered to be high-risk
investments and are typically only available to accredited investors with high net
worth or institutional investors.

What is the relation between IRR and NPV?

The internal rate of return (IRR) and net present value (NPV) are both
measures used in capital budgeting to evaluate the profitability of an
investment. The NPV represents the difference between the present value
of cash inflows and the present value of cash outflows for an investment.
The IRR, on the other hand, is the discount rate at which the NPV of an
investment equals zero.

In other words, IRR is the expected rate of return of a project, and NPV
calculates the dollar value of that expected return. If the NPV of a project
is positive, it means that the project is expected to generate a return
higher than the required rate of return, while a negative NPV indicates
that the project will not meet the required rate of return.

The relationship between IRR and NPV is that they are both used to
determine the feasibility of a project, but they approach the problem from
different perspectives. IRR focuses on the percentage rate of return, while
NPV focuses on the dollar value of the expected return. Both metrics are
important in evaluating investments, and it is generally recommended to
use them together to make informed decisions about investment
opportunities.

What do you know about GPs and LPs?

GPS and LPS are terms used in the context of private equity funds. The
General Partner and Limited Partners have different rights and
responsibilities in the private equity fund. The General Partner is
responsible for managing the fund and making investment decisions,
while the Limited Partners provide the capital and have the right to
 receive a share of the profits generated by the fund. In addition, the
General Partner has the right to receive a management fee and carried
interest, while the Limited Partners have limited control over the
investment decisions made by the General Partner.

What is leveraged buyout?

A leveraged buyout (LBO) is a type of acquisition in which a company is

acquired using a large amount of debt financing. In a leveraged
buyout, the acquiring company, often a private equity firm, borrows a
significant amount of money to finance the purchase of the target
company. The debt is typically secured by the assets of the acquired
company, and the cash flows of the acquired company are used to pay
off the debt over time. The goal of a leveraged buyout is to generate a
high return on investment by using the cash flows of the acquired
company to pay off the debt and generate profits for the investors.

What do you know about Derivatives?

A Derivative is a financial instrument that derives its value from an

underlying asset or group of assets, such as stocks, bonds, commodities,
or currencies. The value of the derivative is based on the value of the
underlying asset, and it can be used for hedging, speculation, or
investment purposes.

There are many types of derivatives, but some of the most common ones
include futures, options, swaps, and forwards.

Futures are contracts that obligate the buyer to purchase a specific asset
at a predetermined price and time in the future. They are commonly used
for commodities like oil, gold, or wheat, but can also be used for financial
assets like stocks or bonds. Options give the holder the right, but not the
obligation, to buy or sell an underlying asset at a specified price on or
before a specific date. They can be used for hedging or speculation.

Swaps involve exchanging cash flows between two parties, often based on
different interest rates or currencies. They are commonly used for
managing interest rate risk or currency risk.

Forwards are similar to futures contracts, but they are not standardized
and are often customized as per the specific needs of the parties involved.
A forward contract is a type of financial instrument that obligates two
parties to buy or sell an underlying asset at a predetermined price and
time in the future. The underlying asset can be a commodity, currency,
stock, bond, or any other financial asset.

Derivatives can be complex financial instruments, and their use can

involve significant risks. However, they can also be useful for managing
risk, generating income, or gaining exposure to specific markets or assets.
 What is the difference between Bonds and debentures?

Bonds and debentures are two types of debt securities that are issued by
companies and governments to raise funds from investors. Both bonds
and debentures are essentially loans made by investors to the issuer,
which must repay the principal and interest according to the terms of the
security.

The main differences between bonds and debentures are:

1. Security: Bonds are secured by specific assets of the issuer, such as real
estate, equipment, or other collateral, while debentures are unsecured
and rely solely on the creditworthiness of the issuer.
2. Interest: Bonds and debentures may have fixed or variable interest rates.
Bonds may also have floating rates that are indexed to a benchmark such
as LIBOR. The interest rate on debentures is typically higher than on
secured bonds because of the higher credit risk.
3. Maturity: Bonds and debentures have a fixed maturity date when the
principal must be repaid to investors. The maturity of bonds may range
from a few years to several decades, while debentures typically have
shorter maturities.
4. Issuer: Bonds may be issued by companies, governments, or other
entities, while debentures are usually issued by corporations.

Explain management fees, incentives fees and performance fees

Management fees, incentive fees, and performance fees are different

types of fees charged by investment managers for managing investment
portfolios.

Management fees are charges that are paid to investment managers to

cover the cost of managing a portfolio of assets. These fees are usually a
percentage of the total assets under management and are typically
charged annually or quarterly.

Incentive fees are fees that are charged by investment managers as an

incentive to generate above-average returns. These fees are usually
calculated as a percentage of the profits generated by the portfolio over a
certain period of time.

Performance fees are fees that are charged by investment managers for
achieving a specific level of performance, such as beating a benchmark
index or achieving a certain level of return. These fees are usually
calculated as a percentage of the profits generated by the portfolio over a
certain period of time.
 Investors need to carefully evaluate the fee structure when investing in
funds managed by investment managers to ensure that the fees charged
are reasonable and aligned with their investment goals.

What do you mean by loan to value & loan to money?

Loan-to-value (LTV) and Loan-to-income (LTI) are two different ratios used
by lenders to assess the risk associated with a loan.

Loan-to-value (LTV) is a ratio that represents the amount of the loan

compared to the value of the asset being purchased. It is commonly used
in real estate lending, where the value of the property is used to
determine the maximum amount of the loan. For example, if a property is
valued at $500,000 and the loan amount is $400,000, the LTV ratio would
be 80%.

Loan-to-income (LTI) is a ratio that represents the amount of the loan

compared to the borrower's income. It is used to assess the borrower's
ability to make the loan payments based on their income level. For
example, if a borrower's monthly income is $5,000 and they are applying
for a loan with monthly payments of $2,000, the LTI ratio would be 40%.

Both ratios are important in determining the risk associated with a loan,
as higher ratios indicate higher risk. Lenders may have maximum LTV and
LTI ratios that they are willing to accept for a particular loan, and may also
consider other factors such as credit history and employment stability
when making lending decisions.

Profitability and liquidity ratios

Profitability and liquidity ratios are two types of financial ratios used by
investors, creditors, and analysts to evaluate the financial performance of
a company.

Profitability ratios measure a company's ability to generate profits in

relation to its revenue, assets, and equity. Examples of profitability ratios
include:

1. Gross profit margin: Measures the percentage of revenue that is left after
deducting the cost of goods sold.
2. Net profit margin: Measures the percentage of revenue that is left after
deducting all expenses, including taxes and interest.
3. Return on assets (ROA): Measures the efficiency of a company's use of its
assets to generate profit.
4. Return on equity (ROE): Measures the return that shareholders earn on
their investment in the company.
 Liquidity ratios, on the other hand, measure a company's ability to meet
its short-term financial obligations. Examples of liquidity ratios include:

1. Current ratio: Measures a company's ability to pay its current liabilities

with its current assets.
2. Quick ratio: Measures a company's ability to pay its current liabilities with
its most liquid assets.
3. Cash ratio: Measures a company's ability to pay its current liabilities with
its cash and cash equivalents.
4. Working capital ratio: Measures the amount of working capital a company
has to meet its short-term obligations.

Both profitability and liquidity ratios are important in assessing a

company's financial health, and investors and creditors typically use a
combination of both types of ratios to make investment decisions.

Accumulated depreciation vs depreciation expense

Accumulated depreciation and depreciation expense are related to the

accounting treatment of long-term assets, such as property, plant, and
equipment.

Depreciation expense refers to the amount of the asset's cost that is

allocated as an expense to the company's income statement each year. It
reflects the decline in value of the asset over its useful life. Depreciation
expense is recorded as a non-cash expense that reduces net income and
increases accumulated depreciation.

Accumulated depreciation, on the other hand, is the total amount of

depreciation expense that has been charged against an asset since its
acquisition. Accumulated depreciation is a contra asset account that is
subtracted from the asset's original cost to determine its net book value.
It reflects the total depreciation expense incurred over the life of the
asset.

In summary, depreciation expense is the amount of the asset's cost that is

allocated as an expense each year, while accumulated depreciation is the
total amount of depreciation expense charged against the asset over its
useful life.

Competitors of blackstone

Blackstone is a global investment firm with a diverse set of competitors,

which include:

1. The Carlyle Group

2. KKR & Co. Inc.
3. Apollo Global Management Inc.
4. TPG Global, LLC
5. Bain Capital
6. Bridgewater Associates LP
7. Vanguard Group
8. State Street Global Advisors
9. Fidelity Investments
10. Goldman Sachs Asset Management
Clients of blackstone

Blackstone has a diverse range of clients that include pension funds, sovereign
wealth funds, high net worth individuals, corporations, and financial institutions.
Some of its major clients include California Public Employees’ Retirement System
(CalPERS), New York State Teachers’ Retirement System, and Washington State
Investment Board.

The interview will be in 3 parts:

Introduction: prepare on yourself, jd and company profile and your internship and
work experience
Technical:
Financial statements basic concepts, cash flows, profitability and liquidity ratios
Loan to value and loan to money
Management fees incentive fees performance fees
LPs and GPs
Basic terms:
contributed capital committed capital NPV IRR cashflow activities, capital budgeting,
leverage buyouts
Financial markets, derivatives,bonds, arbitrage, goodwill and hedging, Deffered
revenue, *General accounting terms and concepts*
Company profile:
What is Blackstone
Alternative source of funds
What is private equity
Structure of private equity
Parties involved in PE
How do PE industry works

C. Computer skills Questions:-

1. What do you know about filter and advance filter

2. What is the difference between V-lookup and H-lookup
3. What do you know about pivot tables and how they are helpful in day today working
4. What do you understand by Goal seeking and conditional formatting?