background
Welcome to Wall Street Prep! Use code at checkout for 15% off.
Wharton & Wall Street Prep Certificates
Now Enrolling for May 2024 for May 2024
:
Private EquityReal Estate Investing
Buy-Side InvestingFP&A
Wharton & Wall Street Prep Certificates:
Enrollment for May 2024 is Open
Wall Street Prep

Finance Interview Questions

Step-by-Step Guide on How to Prepare for Technical Finance Interview Questions

Last Updated January 20, 2023

Learn Online Now

Finance Interview Questions

Finance Interview: Questions and Answers

Before we get to accounting questions, here are some interview best practices to keep in mind when getting ready for the big day.

1. Be Prepared for Finance Technical Interview Questions

Many students erroneously believe that if they are not finance/business majors, then technical questions do not apply to them. On the contrary, 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.

One recruiter we’ve spoken to said “while we do not expect liberal arts majors to have a deep mastery of highly technical concepts, we do expect them to understand the basic accounting and finance concepts as they relate to investment banking. Someone who can’t answer basic questions like ‘walk me through a DCF’ has not sufficiently prepared for the interview, in my opinion”.

Another added, “Once a knowledge gap is identified, it’s typically very difficult to reverse the direction of the interview.”

It’s ok to say “I don’t know” a few times during the interview. If interviewers think that you’re making up answers, they’ll continue probing you further.

Learn More → Investment Banking Primer

2. 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.

It’s ok to say “I don’t know” a few times during the interview. If interviewers think that you’re making up answers, they’ll continue probing you further, which will lead to more creative answers, which will lead to more complicated questions and a slow realization by you that interviewer knows that you don’t really know. This will be followed by uncomfortable silence. And no job offer.

3. Practice Building Financial Models

Learning is most effective from deliberate practice, so ensure you spend enough time building models from scratch.

The accounting and valuation concepts tested in interviews are easier to comprehend when working though an actual model, as opposed to memorizing answers from an interview guide.

Build a 3-Statement Financial Model (Free Course)

Submitting...

Finance Interview Questions: Accounting Concepts

Accounting is the language of business, so don’t underestimate the importance of accounting-related finance interview questions.

Some are easy, some are more challenging, but of all of them allow interviewers to gauge your knowledge level without the need to ask more complex valuation/finance questions.

Below we have selected most common accounting interview questions you should expect to see during the recruiting process.

Q. Why do capital expenditures increase assets (PP&E), while other cash outflows, like paying salary, taxes, etc., do not create any asset, and instead instantly create an expense on the income statement that reduces equity via retained earnings?

A: Capital expenditures are capitalized because of the timing of their estimated benefits – the lemonade stand will benefit the firm for many years. The employees’ work, on the other hand, benefits the period in which the wages are generated only and should be expensed then. This is what differentiates an asset from an expense.

Q. Walk me through a cash flow statement.

A. Start with net income, and go line by line through major adjustments (depreciation, changes in working capital, and deferred taxes) to arrive at cash flows from operating activities.

  • Mention capital expenditures, asset sales, purchase of intangible assets, and purchase/sale of investment securities to arrive at cash flow from investing activities.
  • Mention repurchase/issuance of debt and equity and paying out dividends to arrive at cash flow from financing activities.
  • Adding cash flows from operations, cash flows from investments, and cash flows from financing gets you to the total change of cash.
  • Beginning-of-period cash balance plus the change in cash allows you to arrive at the end-of-period cash balance.

Q. What is working capital?

A: Working capital is defined as current assets minus current liabilities; it tells the financial statement user how much cash is tied up in the business through items such as receivables and inventories and also how much cash is going to be needed to pay off short term obligations in the next 12 months.

Q. Is it possible for a company to show positive cash flows but be in grave trouble?

A: Absolutely. Two examples involve unsustainable improvements in working capital (a company is selling off inventory and delaying payables), and another example involves a lack of revenues going forward in the pipeline.

Q. How is it possible for a company to show positive net income but go bankrupt?

A: Two examples include deterioration of working capital (i.e. increasing accounts receivable, lowering accounts payable), and financial shenanigans.

Q. I buy a piece of equipment, walk me through the impact on the 3 financial statements.

A: Initially, there is no impact (income statement); cash goes down, while PP&E goes up (balance sheet), and the purchase of PP&E is a cash outflow (cash flow statement)

Over the life of the asset: depreciation reduces net income (income statement); PP&E goes down by depreciation, while retained earnings go down (balance sheet); and depreciation is added back (because it is a non-cash expense that reduced net income) in the cash from operations section (cash flow statement).

Q. Why are increases in accounts receivable a cash reduction on the cash flow  statement?

A: Since 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 company never actually received those funds.

Q. How is the income statement linked to the balance sheet?

A:  Net income flows into retained earnings.

Q.What is goodwill?

A: Goodwill is an asset that captures excess of the purchase price over fair market value of an acquired business. Let’s walk through the following example: Acquirer buys Target for $500m in cash. Target has 1 asset: PPE with a book value of $100, a debt of $50m, and equity of $50m = book value (A-L) of $50m.

  • Acquirer records cash decline of $500 to finance the acquisition
  • Acquirer’s PP&E increases by $100m
  • Acquirer’s debt increases by $50m
  •  Acquirer records goodwill of $450m

Q. What is a deferred tax liability and why might one be created?

A: 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.

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.

Q. What is a deferred tax asset and why might one be created?

A: 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.

  • Differences in revenue recognition, expense recognition (such as warranty expense), and net operating losses (NOLs) can create deferred tax assets.

I hope you enjoyed this article and found these finance interview questions helpful. Please feel free to add any comments or recommendations in the comments section below.

Good luck with your interview!

Step-by-Step Online Course

The Investment Banking Interview Guide ("The Red Book")

1,000 interview questions & answers. Brought to you by the company that works directly with the world’s top investment banks and PE firms.

Enroll Today
Comments
190 Comments
most voted
newest oldest
Inline Feedbacks
View all comments
deewakar jha
November 3, 2016 1:52 am

Dear sir, I am pursuing my MBA in finance and currently in second year and the placements are on the doorstep. I request you to keep publishing these kind of articles along with I think, if you will write on how to answer the questions related to the resume, which… Read more »

Dharmesh
September 15, 2018 10:17 am

Respected sir,
I have completed my MBA in HR and FINANCE .I don’t know the whats types of questions asked in the finance interview.
Please tell me sir.

Haseeb Chowdhry
September 15, 2018 7:33 pm
Reply to  Dharmesh

Dharmesh,

We have a really good set of courses that discuss technical and behavorial finance questions, and they cover all the topics candidates should expect to know to ace their interviews – good luck!

Saddam Ali
January 29, 2021 5:58 am
Reply to  Dharmesh

Derivatives, mutual funds, capital market, financial instruments like stock, share, equity, bond, money market nd types, trade life cycle, corporate action with spin off market stock

Sven
May 15, 2018 1:49 am

Q: I have a question of how to calculate net debt when there are derivatives used. Here is the information published by the company on it’s balance sheet: Short term borrowing 1,200 Long term borrowing 6,700 Cash and marketable securities 800 But then in a different part of the report… Read more »

Haseeb Chowdhry
May 17, 2018 11:07 am
Reply to  Sven

Sven, If the company believes these derivative positions can readily be exchanged for cash, that’s fine, but typically I haven’t seen the fair value of derivatives included within the net debt calculation. I would stick with our definition of cash and equivalents, which typically includes Cash, ST investments and LT… Read more »

Sven
May 17, 2018 6:40 pm

Thanks Haseeb, that’s very helpful. For what it’s worth the company says the derivatives are interest rate swaps so I guess the fair value will change as interest rates change. To be conservative, I guess it makes sense to ignore the derivative positions as you have suggested.
Sven

Haseeb Chowdhry
May 18, 2018 6:28 am
Reply to  Sven

I agree with your approach – thanks.

– Haseeb

Muhammad Salik
October 26, 2018 2:12 am

as it is stated that these derivatives are for hedging purposes, then it is irrelevant what is the market position or fair value of derivatives also their position that is long/short. the company must have locked in all relevant risks and certain of their value.

Haseeb Chowdhry
October 29, 2018 9:53 am
Reply to  Muhammad Salik

Muhammad,

Hedges don’t always work; we can assume what you are suggesting but for internal firm purposes it’s important to keep track of the outstanding positions. In the context of valuation, I agree with your points. Good hearing from you Muhammad! Hope all is well!

Best,
Haseeb

charandeep
September 2, 2021 9:38 am

dear sir,

these questions are very helpful for the interview. Thank you so much….

Penina Rotich
June 27, 2020 8:02 am

Nice one

Maphuti seleka
November 21, 2017 11:15 pm

I’m having interview at tax worx and I don’t know what type of questions I will be asked and it’s been 2years since I did accounting and this will be my 1st internship after my N6 achievement in financial management.

Admin
Scott McCarthy
August 7, 2018 10:29 am
Reply to  Maphuti seleka

Maphuti,

I apologize but this website cannot ask specific questions about interviews at certain companies. What I would suggest, generally, is that you review tax accounting concepts and do some research on the type of work this company focuses on. Hope this helps!

Al-mamun
October 3, 2017 12:14 pm

sir,at first take my salam. Sir i can’t answer properly in viva question about finance.Although finance was major in my BBA programmer.what kind of question comes from basic finance. sir please suggest me,,which question can i follow, have you any fdf file “the basic question about finance in viva ”… Read more »

Opubor Efemena
September 17, 2017 1:11 pm

This was very helpful. Thank you very much.

vishnu
September 27, 2017 2:16 am
Reply to  Opubor Efemena

sir,
sorry for the question actually my doubt is a firm’s expenses (2016) they not accounted that year then the next year they paying cash to that party then what will be the entry
plz help

vishnu
October 12, 2017 4:53 am
Reply to  vishnu

Dear sir if the company not disclosing a expense rs.5000 for the date 01-03-2016 (the expenses not accounting in that year) and the payment to made to that party on 01-05-2017 through bank. then how will it shown ( the expenses is for past year) and i am really sorry… Read more »

Haseeb Chowdhry
November 24, 2017 3:31 pm
Reply to  vishnu

Hashmat,

Have you looked into our Technical Finance Prep online course? That course does a great job of covering all topics expected during interviews, in detail. Thanks!

Rohit Sharma
December 4, 2016 11:10 pm

Can you please provide me bunch of questions that usually ask at the time of interview.

Haseeb Chowdhry
November 4, 2016 12:09 pm
Reply to  Rohit Sharma

Deewakar – there are a lot of good resources to focus on MBA interview prep – please check them out – we are focused on IBD training specifically so we can’t promise we’ll write content in line with MBA interview prep. Hope this helps!

tajamul hussain
August 23, 2016 6:54 am

i am going to appear in junior executive finance interview, what are the possible questions which they may ask me?????????

Alexander Neumann
November 20, 2022 7:50 am

Very much on point. Thanks!

Brad Barlow
November 21, 2022 3:15 pm

You’re welcome!

alex
July 29, 2022 6:51 am

Hello dear team I enjoyed this platform it help me to generate more exposure on various finance knowledge.

Brad Barlow
July 29, 2022 8:44 pm
Reply to  alex

Glad to hear it, Alex!

shreya
November 15, 2021 2:56 am

Thank you for providing such a nice interview questions and answer. It helped me a lot.

Muhammad Haris
June 17, 2020 4:01 pm

Thank you this is great work..keep on providing such stuff…more about financial statements and how to do them.

Venu kumar
December 4, 2019 12:23 am

Thank you it must be useful

Shaikh Qutuboddin
February 19, 2019 8:17 am

Hello Sir/Madam, My self Shaikh Qutuboddin, am an MBA grad in Finance also am working as finance and accounts executive in a Multinational Corporationsin Audit, Reconciliation, Revenue and Disbursement Statement preparation so am looking for a job in Financial Planning and Analyst, please advice me what should i prepare for… Read more »

Jeff Schmidt
February 26, 2019 7:59 pm

Shaikh:

Definitely be familiar with the accounting questions and possibly valuation (although valuation is less important than knowing accounting very well).

Best,
Jeff

Shaikh Qutuboddin
February 27, 2019 9:29 pm
Reply to  Jeff Schmidt

Dear Jeff,

Thank you for your kind reply on my request
Could you again advice me on the preparation for financial planning and analysis like Budgeting, Forecasting, and Financial statement analysis kind of material in pdf would be more helpful if u provide
Thanks again
Regards shaikh

Jeff Schmidt
February 28, 2019 6:18 pm

Shaikh: I don’t have anything in PDF but if you go through the questions and answers on https://www.wallstreetprep.com/topics/interview-prep/, you should be prepared to interview for those roles (don’t worry that it says these are common investment banking question and answers as they are common for other finance roles as well).… Read more »

govardhan
December 27, 2018 11:23 am

superb

Anil kumar
July 22, 2018 1:22 pm

Really it was very good but provide in pdf.

Haseeb Chowdhry
July 26, 2018 8:40 pm
Reply to  Anil kumar

Thanks for the suggestions – much appreicated!

Bagcagul
July 21, 2018 5:09 am

Really interesting article. Thanks!

Tijjani Kachallah
July 17, 2018 7:56 am

Epic article and love the prompt answers given to questions asked.

lava kumar
June 11, 2018 1:39 am

nice

PEACE CHIMEZIE
May 26, 2018 6:44 am

Epic Article. Most interesting article read.

Ashwini
May 14, 2018 8:26 am

It’s really useful………. thanks

Clotilda
May 7, 2018 10:36 am

This is good and helpful

Anup Mondal
February 24, 2018 9:35 am

Thanks.
Perfect articles.

BHAGWAN PEDANEKAR
February 16, 2018 6:09 am

THANK YOU SIR

Ayushi
January 17, 2018 10:33 pm

Nice article!!

Hiren
December 15, 2017 11:19 am

Nice article!

Anshu Kumari
November 28, 2017 9:51 am

Can you explain this question in more detail :-
Q: Is it possible for a company to show positive cash flows but be in grave trouble?

Haseeb Chowdhry
January 8, 2018 4:29 pm
Reply to  Anshu Kumari

Anshu, The point of this question is to demonstrate that there are other potential issues that a company can mask. If it’s just shedding old inventory, or booking many more payables, or it has a horrible sales retention rate and there’s significant change of loss in sales going forward, these… Read more »

Anand M K
November 24, 2017 9:45 am

Thank you so much for the article Sir! Really appreciate a lot. This made my confidence boosted as I was searching for Finance Questions to be asked by the interviewer. Really thanks once again Sir.

tayyaba
October 19, 2017 11:39 pm

thanks a lot

vishnu
October 13, 2017 7:16 am

Thank you

Haseeb Chowdhry
October 10, 2017 12:49 pm
Reply to  vishnu

What is the specific current asset? Is it inventory? The answer will be very different from buying equipment. Let’s run through a purchase of inventory: 1) Buying Inventory Debit: Inventory Credit: Cash Inventory then sits on the balance sheet until it is recognized as a Cost of Goods Sold per… Read more »

Hashmat faqiri
November 21, 2017 12:24 am

Dear sir: I have interview in Finance and banking and I need your help that how to prepare myself for it. Method of questions.

PJ Usak
October 8, 2017 8:00 pm

If you buy a Current Asset for $100 how does it flow through the three financial statements?

Is this the same answer as buying equipment?

Haseeb Chowdhry
October 3, 2017 2:46 pm
Reply to  PJ Usak

Al Mamun, Typically basic finance questions talk about your background, why you want to work in finance, and why you want to work in a specific investment bank. If you can answer all of those questions properly, that’s a good start to acing the qualitative portion of the finance interview.… Read more »

vishnu
September 15, 2017 3:05 am

dear sir
in an pantnership firm the previous expenses paid in current year and it would in previous as payable. now the amount is paid then what will be the entries
plz give me a answer

Haseeb Chowdhry
September 26, 2017 10:33 am
Reply to  vishnu

Vishnu, I think you are describing an accrued expense, so when you recognize the expense, the journal entry would be the following: 1) Debit – Expense 2) Credit – Accrued Expense (Liability) When cash is used to pay the expense, this would be the following entry: 1) Debit – Accrued… Read more »

Haseeb Chowdhry
October 1, 2017 11:11 pm

Vishnu, Are you referring to accrued expenses? Accrued expenses typically arise when a company has to declare expenses before actually paying them out in cash. Think of this example – a company’s employees get paid every 2nd and 4th Thursday, but the company has to disclose the expenses not paid… Read more »

Haseeb Chowdhry
October 12, 2017 12:11 pm

Vishnu, If you are following accrual accounting you need to ensure that expense is recognized as an accounts payable – and then you are just paying down the accounts payable. When you say expense, is it an expense related to a supply purchase. If so, the COGS would have already… Read more »

Carlos Esqueda
September 9, 2017 1:54 pm

Thank you!! 🙂

K Masthan
September 9, 2017 1:09 pm

Please send some short tips for Basic Of Accounts Interview questions

Ganesh
August 12, 2017 5:49 am

thank you

Christha
July 27, 2017 11:55 am

Thank you so much. 🙂

Haseeb Chowdhry
July 7, 2017 2:42 pm
Reply to  Christha

Great!

Haseeb Chowdhry
June 1, 2017 4:53 pm

From our discussions with investment banks and prospective candidates, we’ve made a concerted effort to cover the most common questions asked. Thanks!

Zulaikha Madina Zahari
July 6, 2017 4:17 pm

Thank you. This helped me so much.

Akinwunmi zainab
June 17, 2017 8:04 am

Hi,

pls sir wats d link to join if i want to get basic accounting questions nd your update

Haseeb Chowdhry
April 17, 2017 4:56 pm

Shweta,

Goodwill arises when a company pays above the fair market value of the net assets of a target company in an M&A situation. It is an asset that counts for how much the acquirer “overpaid” for the target. I hope this helps – thanks!

Allan
June 5, 2017 10:11 am

thanks for your question and answers, it has help me improve my project issues about financial system assignment

Raymond
June 1, 2017 7:56 am

Are you sure these are the most common questions?

sonu
April 15, 2017 7:29 am

thank u

SHWETA PATIL
April 13, 2017 6:20 am

Hello Sir I have a doubt in goodwill calculation, like goodwill it is reputation of company, then also we will treat it asset and keep in balance sheet with measuring in amount so how you calculate in amount.
can i get explanation.

Romya Ranjan Dash
April 8, 2017 12:10 pm

Precise and informative points for job seekers.

Pounraj
March 23, 2017 2:23 pm

Thanks, hope it’s useful for my interviews

Naveed
March 21, 2017 8:59 am

Precise and clear answers.

Haseeb Chowdhry
February 11, 2017 6:01 pm
Reply to  Naveed

Thank you!

Narayana
February 23, 2017 5:16 am

Very Informative and well written.

Thank You

AMIT
February 15, 2017 1:34 pm

“well explained answers in short way”
Thanks

AMIT
February 15, 2017 1:32 pm

THANKS SIR

vijay
February 15, 2017 12:52 pm

Thanx sir and my help in english speeking in job intarview

Haseeb Chowdhry
January 20, 2017 9:44 am
Reply to  vijay

Thanks!

Learn Financial Modeling Online

Everything you need to master financial and valuation modeling: 3-Statement Modeling, DCF, Comps, M&A and LBO.

Learn More