A financial analyst is responsible for making good financial decisions in an organization.
To become a Finacial analyst, you must start by answering the interview questions confidently.
The article discusses the top 20 commonly asked questions a financial analyst faces during an interview. So, keep reading till the end of the article to know more about how to answer questions in an interview for becoming a financial analyst.
Financial Analyst Interview Questions
#1. What makes you dream of becoming a Financial Analyst?
The interviewer asks this question about your passion for becoming a financial analyst or why you are interested in becoming a financial analyst.
You can answer in the following way.
I decided to become a Finacial analyst because I was keen to know about the structure of businesses and their ways of making money or how it archives profit in the market. I have also read biographies of many entrepreneurs to learn how they started businesses and achieved a reputable positions in the market.
#2. Why do you want to work in our organization?
The company wants to know the exact reason for your interest in working in their company.
For instance, if you have applied for a financial analyst role in a bank, your answer can be given in the following way.
A bank is an institution that provides finances to large institutions or entrepreneurs. So, it primarily provides fuel to the economic growth of our country. I would like to be a part of such a vital process.
#3. What Is Financial Modelling?
Financial modeling is a tool used to measure the financial status of an organization.
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#4. What do you understand about the Cash flow statements?
A cash flow describes the cash coming and outgoing in any organization. So, in short, it describes how money is managed and generated by a company.
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#5. Can a company have positive cash flow despite being in severe financial straits?
You can answer this question in two ways.
- If a company sells inventories presently but delays in paying debts, it can have a positive cash flow for some time irrespective of having financial problems.
- Even if a company has good revenue at present, the future estimation may show that there will be a reduction in income.
#6. What is NPV?
NPV is the net present value method and tells you the difference between the current values of cash outflows and the inflows of a project in a given period.
#7. List different types of financial statements.
- Cash flow statement
- Ballance sheets
- Income statement
- Shareholders equity statements
#8. What is working capital?
Working capital = current assets – liabilities of the company.
The existing assets mean the money in the bank or any help that can be converted into cash in any bad situation.
The current liabilities refer to the debt the company must pay for a given period. They include wages, taxes, and others.
#9. How can you distinguish between the balance sheet and the P &L statement?
The profit and loss statement describes the money generated, costs involved, and expenditures of an entity within a fixed time. The records help access a company’s ability to increase profit by increasing revenue or lessening costs.
The balance statement helps show the financial status of any organization for a fixed time.
#10. Which tools are best for advanced financial modeling?
- Oracle BI
- Maple soft
#11. What is EBITDA?
EBITDA means the earnings of a company before interest, taxes, depreciation, and amortization. This information helps in determining the financial performance of a company.
EBITDA = Operating Income + depreciation +amortization.
#12. Can the company have benefits when it raises debt over equity?
Yes, the company can have the benefits described below.
- Debt is cheap compared to equity.
- Raising debt can have tax benefits.
#13. What is the need for analyzing long-term ability?
Long-term liability is a company’s debts that continue for more than 12 months. It will help in finding the financial strength of an organization.
#14. Can you list three data formats in excel?
Three data formats in excel are as follows.
- String (it comprises letters and numbers)
- Numbers(Numeric format)
- Currencies(Monetary format)
#15. Can you include debts and dividends in the cash flow statement?
No, we cannot involve debts and dividends in the cash flow statement.
#16. Have you used financial reporting software ever?
If you have ever used financial reporting software, you can mention them. The most popular financial reporting software is quick books online. The software helps create a company summary by adding all the investments and risk factors.
#17. What are the types of financial analysis? Explain at least two.
- Liquidity ratio analysis helps to ascertain the ability of a company to meet short-term contracts. Liquidity refers to how quickly a company can convert assets into cash.
- Leverage analysis is done to determine the financial performance of a company. It can be calculated by finding the debt-to-equity ratio.
#18. How can you measure the liquidity of a company?
A company’s liquidity refers to its ability to pay its current debt and liabilities.
You can calculate the liquidity of an entity in the following ways.
- You can divide current assets into current liabilities of an entity.
- You need to calculate the net working capital of a company.
#19. What is free cash flow?
Free cash flow is the leftover cash of the entity after paying operating expenses and capital expenditures.
#20. What is capital structure?
The capital structure shows how the company pays for its entire operations through numerous sources of funds.
Conclusion
The answers provided for the Financial analyst interview questions above will help you ace the interview. But you need to answer the questions clearly and with confidence.
Join Seekho to accelerate your career as a Finacial analyst. There are more than 500 workshops and courses conducted by industry professionals on Finance. If you miss a live class, you can use the recordings that are available for 48 hours.
