Top 12 Finance Questions and Answers that will Prepare You for the Interview
An interview demands nothing more than deep knowledge about the field you are planning to apply. For instance, if you are planning to apply for the position of a financial analyst, you must be aware of concepts and terms like financial analysis reports, financial statements, evaluation metrics, portability model, cash flow, balance sheet, among others. Therefore, to pass a finance interview, you must be well-versed with all the finance-related concepts and terms.
Moreover, preparedness is the key to successfully passing an interview. So, if you wish to make a splash in your finance interview with your excellent answers, then prepare yourself with these interview questions. Here are some common finance interview questions and answers to prepare you for the interview.
Common Finance Interview Questions
Why did you choose finance?
The interviewer expects you to talk about what you love the most about Finance while answering this question. Employers are keen on hiring employees who are passionate about the business. Therefore, you should use different instances to demonstrate your interest in Finance, which will increase your chances of passing the Finance interview.
What is the greatest achievement in your financial career so far?
Your accomplishments are those embellishments that would enhance your prospectus. Therefore, never be reluctant to share your accomplishments with an employer. Talk in detail about your greatest achievement with the interviewer. It would help them gauge your capabilities. Furthermore, it will give hiring managers an idea that you are result-oriented and try tooth and nail to achieve excellence.
What are your strengths and weaknesses?
With this finance interview question, the recruiter is trying to test your business acumen, planning skills, and ability to tackle financial-related roadblocks, among others. So, answer this basic finance interview question while keeping in mind those mentioned above—also, state instances where you applied your strengths to solve a business problem.
Beginner-Level – Finance Interview Questions for Freshers
What does working capital mean?
The amount you get after deducting current liabilities from current assets is called Working capital. It is also known as networking capital or NWC and is a measure of a company’s liquidity, financial health, and operational efficiency.
Positive working capital means that the company can run its current operation and fund future growth and development. Meanwhile, negative NWC means the company is at a loss with current liability surpassing current assets. Working capital is important because it facilitates solvency in business.
What is a cash flow statement? Explain in detail?
The cash flow statement is a financial record that summarizes the movement of cash and cash equivalents from and into the company. The statement measures how the company generates cash to clear its debts and fund its operating expenses. This is one of the most important financial statements that a company prepares, thereby, making this a commonly asked finance interview question. Furthermore, the balance sheet and income statement are the other two important financial statements.
A cash flow statement is an important tool for creditors and investors to determine the company’s financial condition. This financial statement gives them a clear picture of the cash available, the expenses, and the financial stability of the company.
What do you mean by hedging?
Hedging is a popular risk management strategy that is undertaken by businesses to avoid financial loss. It is an investment done by the business to reduce the risk of fluctuating price movements in an asset. The company offsets the loss in a hedge by taking an opposite position in a related asset.
Although hedging reduces risk, it also reduces potential profit. For instance, you get an insurance policy to protect your house from fire or any other natural or man-made disaster. Even though you will claim if a hazard occurs, the amount of the claim will not compensate for the premium amount you paid for the insurance.
Therefore, hedging is not about maximizing profits, instead, it is about minimizing risks.
A few more common finance interview questions for freshers are:
- How do you define preference capital?
- Do positive cash flows always mean financial stability?
- How can a company have a positive net income but still be bankrupt?
Intermediate-level Finance Interview Questions and Answers
What is the meaning of the secondary market?
Secondary markets sell securities like bonds, shares, and others that have been already offered in the primary market. Mostly, the investors who bought a company’s securities through an initial public offer (IPO) sell them on the secondary market to other people. The money received after the sale goes to the investors, not to the company.
NASDAQ, Bombay Stock Exchange (BSE), and New York Stock Exchange (NYSE) are some of the examples of secondary markets.
What is the difference between Cost accounting and Costing?
| Costing | Cost accounting |
| Costing is the process of identifying the cost of any product, service, or activity. | Cost accounting is the method of recording the costs incurred by the product, service, or activity. |
| It has a narrow scope in finance. | It has a comparatively wide scope in finance. |
| Accounting principles are not applied in this activity. | Accounting principles are applied in this activity. |
| It is not used for decision-making. | It is an important tool in decision-making. |
| It is a process of calculating costs incurred by the business. | It is a specialized branch of accounting that goes beyond cost. |
What is the meaning of RAROC?
RAROC or Risk-Adjusted Return on Capital is used to analyze a company’s financial performance. It was developed in the 1970s by Bankers Trust. In a decade, the tool replaced the simple return on capital (ROC) technique of analyzing financial performance. RAROC is perfect for measuring a bank’s profitability.
A few more Intermediate-level finance Interview questions are:
- What is the meaning of Fair Value?
- What is the meaning of Cost Accounting? State some objectives of Cost Accounting?
Advanced-Level Finance Interview Questions and Answers
What is the difference between a journal and a ledger entry?
| Journal entry | Ledger entry |
| The book where all the business transactions are recorded. | The book where all business transactions are transferred to their particular accounts. |
| It is a subsidiary book and it records transactions sequentially. | It is the principal book and records transactions account-wise. |
| This book doesn’t need to be analyzed at the end of the month. | This book needs to be analyzed at the end of the month to determine the expenses. |
| This book is also known as ‘Book of original entry’. | This book is also known as ‘Book of secondary entry’. |
What is the meaning of Goodwill in business?
Goodwill is an intangible asset. It refers to the value a company gets from its brand and reputation.
A few more advanced-level finance interview questions and answers are:
- What do you mean by Deferred Tax Liability?
- What do you mean by the Put option?
- What do you mean by Adjustment entries?
How To Prepare for A Finance Interview?
- Research about the company beforehand
- Review your resume and also get a second opinion
- Wear your confidence and showcase your communication skills
- Brush up on technical knowledge
- Research and keep ready Industry examples for each interview question.
Preparing for a finance interview can be difficult, but with the right skills and knowledge, you can ace an interview. With the best online and in-person courses in Finance, Emeritus India prepares you for the future.
