FINANCE INTERVIEW QUESTIONS

Q1: 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?

Q2: Walk me through a cash flow statement.

Q3: What is working capital?

Q4: Is it possible for a company to show positive cash flows but be in grave trouble?

Q5: How is it possible for a company to show positive net income but go bankrupt?

Q6: I buy a piece of an equipment, walk me through the impact on the 3 financial statements.

Q7: Why are increases in accounts receivable a cash reduction on the cash flow statement?

Q8: What is goodwill?

Q9: What is a deferred tax liability and why might one be created?

Q10: What are various streams of accounting?

Q11: Explain financial accounting. What are its characteristic features?

Q12: What are limitations of Management accounting?

Q13: Compare financial accounting and cost accounting.

Q14: Explain dual aspect concept.

Q15: Explain Money Measurement concept.

Q16: If I could use only 1 statement to review the overall health of a company, which statement
would I use and why?

Q17: When should a company consider issuing debt instead of equity?

Q18: How do you calculate the WACC?

Q19: What in your opinion makes a good financial model?

Q20: What does negative working capital mean?

Q21: When do you capitalize rather than expense a purchase?

Q22: How does an inventory write down affect the three statements?

Q23: Why would two companies merge? What major factors drive mergers and acquisitions?

Q24: If you were CFO of our company, what would keep you up at night?

Q25: What happens to Earnings Per Share (EPS) if a company decides to issue debt to buy back
shares?

Q26: Walk me through a DCF.

Q27: Why might a high tech company have a higher PE than a grocery retailer?

Q28: Tell me when you would see a company with a high EV/EBITDA multiple but a low PE
multiple.

Q29: What is a beta?

Q30: Why do you unlever beta?

Q31: What’s the difference between enterprise value and equity value?

Q32: What are the most common multiples used to value a company?

Q33: what are the recent issues in FDI's in India?

Q34: How do you calculate the terminal value of a company?

Q35: When can hedging an options position make you take on more risk?

Q36: Tell me about a stock you like or hate and why

Q37: What is the difference between default and prepayment risk?

Q38: What is the current repo, reverse repo rate?

Q39: What is the difference between internal and statutory audit?

Q40: What are options and futures?

Q41: What are bonds and how to value a bond?

Q42: What is the difference between mercantile system and cash system of accounting?

Q43: What are the reasons for the difference in the balances as shown by the cash book and the
pass book?

Q44: What is debit note and credit note? What is the difference between them?

Q45: What is Contingent Liabilities?

Q46: What is Deferred Revenue Expenditure? Give some examples.

Q47: What is the relation between journal and ledger?

Q48: What is the difference between Accounts and Finance?

Q49: What is FBT (Fringe Benefit Tax)?

Q50: What is accounting normalization?

Q51: What is the meaning of TDS? How it is charged?