Finance interview questions to prepare for
With the start of a new academic year, we know that finance interviews are again at the forefront of many of your minds. Over the next few months, we’ll be publishing most frequently asked technical finance interview questions and answers across a variety of topics – accounting (in this issue), valuation, corporate finance – to get you prepared. If you’re looking for interview prep resources beyond this article, be sure to take a look at our Interview Prep training package.
Table of Contents
- Finance interview best practices
- Finance interview questions: accounting
- 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?
- Q: Walk me through a cash flow statement.
- Q: What is working capital?
- Q: Is it possible for a company to show positive cash flows but be in grave trouble?
- Q: How is it possible for a company to show positive net income but go bankrupt?
- Q: I buy a piece of equipment, walk me through the impact on the 3 financial statements.
- Q: Why are increases in accounts receivable a cash reduction on the cash flow statement?
- Q: How is the income statement linked to the balance sheet?
- Q: What is goodwill?
- Q: What is a deferred tax liability and why might one be created?
- Q: What is a deferred tax asset and why might one be created?
Finance interview best practices
Before we get to accounting questions, here are some interview best practices to keep in mind when getting ready for the big day.
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.
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.