Finance Interview Questions (And Answers) - Wall Street Prep - Wall Street Prep

9/2/2017 Common Finance Interview Questions (and Answers) | Wall Street Prep - Wall Street Prep
Wall Street Prep | www.wallstreetprep.com
Common Finance Interview Questions (and

Answers)
The WSP Blog > IB Interview Tips
With the start of a new academic year, we know that nance

interviews are again at the forefront of many of your minds.
Over the next few months, well be publishing most frequently
asked technical nance interview questions and answers across
a variety of topics accounting (in this issue), valuation,
corporate nance to get you prepared.
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 technical questions. Many students

erroneously believe that if they are not
nance/business majors, then technical questions do not apply to them. On the contrary, interviewers want to
be assured that students going into the eld are committed to the work theyll be doing for the next few years,
especially as many nance rms will devote considerable resources to mentor and develop their new
employees.
2. One recruiter weve 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 nance concepts as
they relate to investment banking. Someone who cant answer basic questions like walk me through a DCF
has not su ciently prepared for the interview, in my opinion.
3. Another added, Once a knowledge gap is identi ed, its typically very di cult to reverse the direction of the
interview.
4. 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.
5. Its ok to say I dont know a few times during the interview. If interviewers think that youre making up
answers, theyll 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 dont really know.
This will be followed by uncomfortable silence. And no job o er.
Now, on to Accounting Questions
Accounting is the language of business, so dont underestimate the importance of accounting questions. Some are
easy, some are more challenging, but of all of them allow interviewers to gauge your knowledge level without the need
https://www.wallstreetprep.com/blog/finance-interview-questions-and-answers/ 1/38
to ask more complex valuation/ nance questions.Below we have selected most common accounting questions you
should expect to see during the recruiting process.
Q: Why do capital expenditures increase assets (PP&E), while other cash out ows, 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 bene ts the lemonade stand will
bene t the rm for many years. The employees work, on the other hand, bene ts the period in which the wages are
generated only and should be expensed then. This is what di erentiates an asset from an expense.
Q: Walk me through a cash ow statement.
A. Start with net income, go line by line through major adjustments (depreciation, changes in working capital and
deferred taxes) to arrive at cash ows from operating activities.
Mention capital expenditures, asset sales, purchase of intangible assets, and purchase/sale of investment
securities to arrive at cash ow from investing activities.
Mention repurchase/issuance of debt and equity and paying out dividends to arrive at cash ow from
nancing activities.
Adding cash ows from operations, cash ows from investments, and cash ows from nancing gets you to
total change of cash.
Beginning-of-period cash balance plus change in cash allows you to arrive at end-of-period cash balance.
Q: What is working capital?
A: Working capital is de ned as current assets minus current liabilities; it tells the nancial 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 o short term obligations in the next 12 months.
Q: Is it possible for a company to show positive cash ows but be in grave trouble?
A: Absolutely. Two examples involve unsustainable improvements in working capital (a company is selling o inventory
and delaying payables), and another example involves 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 nancial shenanigans.
Q: I buy a piece of equipment, walk me through the impact on the 3 nancial 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 out ow (cash ow 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 ow statement).
Q: Why are increases in accounts receivable a cash reduction on the cash ow statement?
A: Since our cash ow statement starts with net income, an increase in accounts receivable is an adjustment to net
income to re ect the fact that the company never actually received those funds.
Q: How is the income statement linked to the balance sheet?
A: Net income ows 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. Lets
walk through the following example: Acquirer buys Target for $500m in cash. Target has 1 asset: PPE with book value of
$100, debt of $50m, and equity of $50m = book value (A-L) of $50m.
Acquirer records cash decline of $500 to nance acquisition
Acquirers PP&E increases by $100m
Acquirers 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 companys 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.
Di erences in depreciation expense between book reporting (GAAP) and IRS reporting can lead to di erences in
income between the two, which ultimately leads to di erences in tax expense reported in the nancial 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.
Di erences 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. Please feel free to write me with any comments or recommendations
at alibman@wallstreetprep.com.
Best regards,
Arkady
Written by Arkady Libman
alibman@wallstreetprep.com
Arkady co-authored many of Wall Street Preps training materials and has conducted corporate training for many of Wall
Street Preps clients, including Enogex, Rosetta Resources, Hess Corporation, Silicon Valley Bank, RBC Capital Markets, Stifel
Nicolaus, and FBR Capital Markets. In addition, Arkady conducts training programs at top business schools across the
world, including Wharton, MIT Sloan, Wharton, Tuck, INSEAD, London Business School, and University of Michigan. Prior to
joining Wall Street Prep, Arkady was an Associate within the Energy & Natural Resources of the Equity Research Group at
FBR Capital Markets. Prior to joining FBRC in October 2001, Arkady was an Investment Banking Analyst within J.P. Morgan
Chases Global Oil & Gas Group.
129 Comments
Ganesh AUGUST 12, 2017
thank you
Reply
Christha JULY 27, 2017
Thank you so much.

Reply
Zulaikha Madina Zahari JULY 6, 2017
Thank you. This helped me so much.

Reply
Haseeb Chowdhry JULY 7, 2017
Great!
Reply
Akinwunmi zainab JUNE 17, 2017
Hi,
pls sir wats d link to join if i want to get basic accounting questions nd your
update
Reply
Haseeb Chowdhry JUNE 20, 2017
Akinwunmi,
We periodically update our coursework and will provide you with email
noti cations. Pertaining to accounting questions that would be common, I would
refer to going through the Accounting Crash Course.
Reply
Allan JUNE 5, 2017
thanks for your question and answers, it has help me improve my project issues
about nancial system assignment
Reply
Raymond JUNE 1, 2017
Are you sure these are the most common questions?

Reply
From our discussions with investment banks and prospective candidates, weve
made a concerted e ort to cover the most common questions asked. Thanks!
Reply
sonu APRIL 15, 2017
thank u
Reply
SHWETA PATIL APRIL 13, 2017
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.

Reply
Haseeb Chowdhry APRIL 17, 2017
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!
Reply
Romya Ranjan Dash APRIL 8, 2017
Precise and informative points for job seekers.

Reply
Pounraj MARCH 23, 2017
Thanks, hope its useful for my interviews

Reply
Naveed MARCH 21, 2017
Precise and clear answers.

Reply
Narayana FEBRUARY 23, 2017
Very Informative and well written.
Thank You
Reply
AMIT FEBRUARY 15, 2017
well explained answers in short way
Thanks
Reply
AMIT FEBRUARY 15, 2017
THANKS SIR
Reply
vijay FEBRUARY 15, 2017
Thanx sir and my help in english speeking in job intarview

Reply
mounuddin ansari FEBRUARY 11, 2017
its really precise and understandable ans.
thank u sir
Reply
Haseeb Chowdhry FEBRUARY 11, 2017
Thank you!
Reply
Shweta FEBRUARY 8, 2017
Thank you sir.

Reply
Shweta JANUARY 25, 2017
Very Informative and well written. Thank You!

Reply
mamta sharma JANUARY 20, 2017
thnk u sir for the e orts u had made for the interseted readers with proper
explaination of the important topics
Reply
Haseeb Chowdhry JANUARY 20, 2017
Thanks!
Reply
Vijay Gowda JANUARY 19, 2017
All are use full questions & Answers. Thank u

Reply
Thanks!
Reply
RAMESH Chauhan JULY 25, 2017
Want to connect directly for more interviews questions and answers

Reply
Ramesh,
Please reach out to support@wallstreetprep.com for this request thanks!
Haseeb
Reply
AMI JANUARY 18, 2017
Like Rohit Sharma I am also in need of many more such Q&A to help me in my
upcoming interviews.
I dont know how to contact IBD for mock interviews. So in the interim your
prompt help in providing many more such Q&A will be helpful.
Reply
Stay tuned for more content online, but I encourage you to also visit
http://www.wallstreetoasis.com for additional interview content.
Reply
Pervez DECEMBER 28, 2016
Short & simple & more helpful.
Thank you.
Reply
Haseeb Chowdhry DECEMBER 29, 2016
Thanks!
Reply
Rohit Sharma DECEMBER 4, 2016
Can you please provide me bunch of questions that usually ask at the time of
interview.
Reply
Rohit I would reach out to peers who are currently working in IBD and conduct
mock interviews with them thats the best approach!
Reply
Ambarin Anwar NOVEMBER 23, 2016
Very informative article. Its going to be of very great help in my preparations for
upcoming interviews.
Reply
Haseeb Chowdhry NOVEMBER 27, 2016
No problem thanks!
Reply
deewakar jha NOVEMBER 3, 2016
Dear sir,
I am pursuing my MBA in nance 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 really drives the interview.
Awaiting your positive response.
Thanks for your support.
Deewakar Jha
ph-9738337737
Bangalore.
Reply
Deewakar there are a lot of good resources to focus on MBA interview prep
please check them out we are focused on IBD training speci cally so we cant
promise well write content in line with MBA interview prep. Hope this helps!
Reply
Mamatha AUGUST 15, 2016
I had been searchIng for basics to prepare myself for interview. Im glad your
article helped me .
Reply
tajamul hussain AUGUST 23, 2016
i am going to appear in junior executive nance interview, what are the possible
questions which they may ask me?????????
Reply
Shannan Wilson AUGUST 23, 2016
Tajamul,
Check out our IB Interview Prep Pack Plus for help with your interview. It
includes 200+ of the most common technical questions with sample answers
and 30 sample behavioral interview questions!
Reply
VIJAY PATIDAR AUGUST 14, 2016
Short and Sweet. Very helpful.

Reply
Abdeleah Alqahtani AUGUST 9, 2016
Thank you very much for those informative answers.

Reply
ade oye emmanuel olushola AUGUST 3, 2016
Good evening,I nished my ond in banking and nance 2007,I have been into
music since then till now I play lead guitar and little on keyboard,I have forgotten
everything on d course I study for 3years and I was called for and interview and I
dont even know what to study please help me.what can I do please I need your
help,you can ash me or send me a text on this number so I can call you back
08141685743,08055535826
Reply
Shannan Wilson AUGUST 4, 2016
Hi Ade oye,
We o er the Wall Street Prep IB Interview Prep Pack Plus which includes 200+ of
the most common technical questions with sample answers and 30 sample
behavioral interview questions. We also o er IB Interview Prep Pack Plus
& The Premium Package which Everything in the IB Interview Prep Pack Plus,
Complete nancial modeling training program and Certi cation in Financial and
Valuation Modeling. I hope this helps!
Shannan
Reply
Byju Subhash AUGUST 1, 2016
This was really helpful. Thanks a lot!

Reply
chaitanya JULY 13, 2016
hi
this is very good.
it is very simple and clear.
thank you
Reply
Jeanica JUNE 19, 2016
I really appreciate your answers!! Its very useful!! Thank u!

Reply
Kamal JANUARY 24, 2016
Hi,
Can you provide me resource or database, which contains similar types of

questions. Liked these set of questions.
Regards
Reply
Shannan Wilson FEBRUARY 9, 2016
Hi Kamal,
We o er the Wall Street Prep IB Interview Prep Pack Plus which includes 200+ of
the most common technical questions with sample answers and 30 sample
behavioral interview questions. We also o er IB Interview Prep Pack Plus
& The Premium Package which Everything in the IB Interview Prep Pack Plus,
Complete nancial modeling training program and Certi cation in Financial and
Valuation Modeling. I hope this helps!
Reply
kanthi shanmugamnathan JANUARY 3, 2016
yes, i enjoyed this article.hope it ll b useful for my interviews
thank you.
Reply
Glad you liked it!

Reply
Hisham JULY 26, 2017
dear sir iam going to interview tommorow give me some suggestions how to
pass out the interview is about bank related and nance
Reply
Hisham,
Study the core tenets of our valuation courses, work with a friend to mock
interview you on technical and t based questions, and you will be in good
shape good luck!
Reply
pradeep shah DECEMBER 30, 2015
this question is really very helpful but sir please include some case study type
question and please add some term and nancial word because if interviewer
ask some nancial word and we all read but on that we forget or not prepare
nancial term. if you add next time this type of question . That is very helpful to
us.
Reply
These are all great suggestions thanks!

Reply
Ssaurabh vashistt DECEMBER 1, 2015
Very helpful thingThanks for this and must say that plz add more questions
in it so that we can grab the knowledge or plz share the site or any link
where we can grab the knowledge of nance.
Reply
Will do thanks!
Reply
devaraj .j NOVEMBER 28, 2015
very smart answers thank you it is useful for my life

Reply
Thanks so much!
Reply
Nehal OCTOBER 23, 2015
Hi,
Thank you so much for sharing the knowledge

Reply
JUN JUN TOLICA NOVEMBER 10, 2015
It helps me a lot thank you

Reply
Thanks!
Reply
Khoshali OCTOBER 20, 2015
Very helpful.. Hoping for more posts like this!

Reply
Haseeb Chowdhry OCTOBER 20, 2015
Thanks Khoshali!
Reply
Asif Hossain OCTOBER 18, 2015
Thank you!
Reply
Mustaq OCTOBER 13, 2015
Dear Sir/Madam
Please send some short tips for Basic Of Accounts Interview
Thanks
Reply
Mustaq I think most of our basic accounting questions are covered within our
basic nance questions thanks!
Reply
Yesha Patel OCTOBER 11, 2015
Very useful set of questions and answers. Would be great if you kindly forward
many more on my personal mail Id as I am preparing for my placements.
Reply
I think we have you on a list that keeps you aware of the upcoming webinars we
have thanks!
Reply
Katie Roszik OCTOBER 7, 2015
That was a great article with lots of useful information I really enjoyed reading it,
thanks so much
Reply
Thanks!
Reply
Deepeksha SEPTEMBER 30, 2015
This is very helpful..thank u

Reply
prashanth dev AUGUST 19, 2015
Very much useful questions really to say ..was help full kindly add some more
questions like this so that it can be helpful for many who really refer this path ..
Reply
Haseeb Chowdhry AUGUST 19, 2015
Prasanth keep on checking out our website for updates thanks!

Reply
Surya Tej Singh AUGUST 9, 2015
Excellent information..it cleared many of my doubts.thank u

Reply
salih AUGUST 8, 2015
It is very helpful thank you for your e ort

Reply
mercy JULY 30, 2015
thanks. this was very educative.

Reply
shiavm divedi JULY 25, 2015
very important knowledge. thank you sir

Reply
santosh kumar JULY 7, 2015
It is very helpful for the people and keep doing it.

Reply
Thanks!
Reply
rodrick JULY 10, 2015
enjoyed,Thanks
Reply
Awesome thanks!
Reply
Jesofa JUNE 29, 2015
These questions are really good. They are essential things to know in nancial
reporting. Thanks for helping, would practice repeatedly.
Reply
Thanks!
Reply
vinoth Kumar.g NOVEMBER 4, 2016
Very useful questions thank you

Reply
No problem! Thanks!
Reply
Suzy Anna JUNE 10, 2015
Hi,
It is very very useful continue with the spirit.
And thank
Reply
Brett MAY 27, 2015
Ive read this article over before several of my interviews and it was extremely
helpful.
Thank you!
Reply
Md. robiul Islam MAY 16, 2015
Many Many Thanks !

Reply
kumaras MAY 13, 2015
Its really Good.. i enjoyed it Thanks..

Reply
yousuf APRIL 26, 2015
nice job, thanks
Reply
Johannes Aphane APRIL 21, 2015
This is great. thanks

Reply
sathish APRIL 18, 2015
Thank you verymuch these basic nancial qustions are very hellped me good jo
.
Reply
Pawan APRIL 15, 2015
This article is very useful speci cally for people who are looking for hard core
accounting job. Request you to please provide some interview Q/A and tips for
MBA Finance people who are looking job other than hard core accounting job.
Thanks.
Reply
Pawan,
Look at the link I provided on 4/6 thanks!

Reply
jyoti kshirsagar APRIL 12, 2015
Wow.thankuu so muchhhh.i ws so helpful

Reply
Priya APRIL 12, 2015
Your article given more information and my suggestion is you can add little
more information
Reply
Thanks Priya stay tuned for new and exciting content!

Reply
Aks APRIL 6, 2015
That was a very helpful quick recap of the accounting section.
But where are questions from Valuation and corporate nance?

Reply
Aks,
Check this link out: http://www.wallstreetprep.com/knowledge/investment-

banking-interview/
Haseeb
Reply
v.Mithilesh APRIL 4, 2015
its like refreshing the entire degree subj use full for us.
Reply
Muhammad Aslam MARCH 31, 2015
Massive information.thanks .
Reply
manoj MARCH 16, 2015
Financial question and answer is very much useful for me

Reply
k.lalitha MARCH 16, 2015
very fantastic article was very informative

Reply
ashok MARCH 1, 2015
Thanks its very helpful. Generally when we go for interview we usually receive a
set a pratical Q and then asked to solve. Can u pls help us with such Q.
Reply
Haseeb Chowdhry MARCH 1, 2015
Ashok,
Try creating question scenarios for yourself. Lets say you have an Apple tree.
How can you value that Apple tree? Stu as simple as that will get you started
and will get you to a point where you can explain a DCF very simply to a person.
Thanks.
Haseeb
Reply
kalpana FEBRUARY 20, 2015
Very nice and useful collection of questions related to accounts and nance.
Thanku
Reply
Sultan Ahmed Khan FEBRUARY 12, 2015
Thanks
Reply
Kalpana FEBRUARY 11, 2015
Thank you so much for your valuable guidence!

Reply
Not a problem enjoy!

Reply
swathi FEBRUARY 18, 2015
hai its very useful.. can you plz more adding question for experience ppl.
Reply
Keep on the lookout for newer material thanks!

Reply
Julius JANUARY 27, 2015
This was awesome, perfect prep!
Thanks so much.
Reply
Great to hear! Thanks!

Reply
Sunit Kumar jha JANUARY 23, 2015
Very valuable information for me.plz more adding question.
Thank You
Reply
Not a problem we will keep them coming!

Reply
Lucy JANUARY 20, 2015
Hello
Those are very useful and helpful answers.
Thanks.
Reply
Great to hear thanks!

Reply
reddy shekar reddy DECEMBER 25, 2015
i want what type of question ask to the companys in the genral

Reply
You should ask questions about the types of work youll be doing in the role, the
types of projects expected of you to complete, how your managers want to work
with you. You also want to get an idea of the culture of the rm is it collegiate,
is there more of an emphasis on face time, etc. You want to get a feel for the
rm and people b/c you will spend considerable time there hope this helps!
Reply
Gayathri.GV JANUARY 19, 2015
The above questions are really use full.

Reply
Thanks!
Reply
harish JANUARY 15, 2015
its very use full information if it is possible could u send to my mail id

Reply
Harish,
Keep on looking for updates here take care!
Best,
Haseeb
Reply
Isha DECEMBER 19, 2014
Was very helpful. Please keep adding more questions to this.

Reply
MOHAMMED RHISWAN DECEMBER 14, 2014
Very very very useful information. Thank you

Reply
esther NOVEMBER 7, 2014
hello.
the article is very helpful & useful. thank you. keep it up

Reply

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9/2/2017 Common Finance Interview Questions (and Answers) | Wall Street Prep - Wall Street Prep

Wall Street Prep | www.wallstreetprep.com

Common Finance Interview Questions (and

With the start of a new academic year, we know that nance

Before we get to accounting questions, here are some interview

1. Be prepared for technical questions. Many students

Now, on to Accounting Questions

Q: Walk me through a cash ow statement.

Q: What is working capital?

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

A: Net income ows into retained earnings.

Acquirer records cash decline of $500 to nance acquisition

Acquirers PP&E increases by $100m

Acquirers debt increases by $50m

Acquirer records goodwill of $450m

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?

Written by Arkady Libman

Ganesh AUGUST 12, 2017

Christha JULY 27, 2017

Thank you so much.

Zulaikha Madina Zahari JULY 6, 2017

Thank you. This helped me so much.

Haseeb Chowdhry JULY 7, 2017

Akinwunmi zainab JUNE 17, 2017

Haseeb Chowdhry JUNE 20, 2017

Allan JUNE 5, 2017

Raymond JUNE 1, 2017

Are you sure these are the most common questions?

Haseeb Chowdhry JUNE 1, 2017

sonu APRIL 15, 2017

SHWETA PATIL APRIL 13, 2017

Hello Sir I have a doubt in goodwill calculation, like goodwill it is reputation of

can i get explanation.

Haseeb Chowdhry APRIL 17, 2017

Romya Ranjan Dash APRIL 8, 2017

Precise and informative points for job seekers.

Pounraj MARCH 23, 2017

Thanks, hope its useful for my interviews

Naveed MARCH 21, 2017

Precise and clear answers.

Narayana FEBRUARY 23, 2017

Very Informative and well written.

AMIT FEBRUARY 15, 2017

well explained answers in short way

AMIT FEBRUARY 15, 2017

vijay FEBRUARY 15, 2017

Thanx sir and my help in english speeking in job intarview

mounuddin ansari FEBRUARY 11, 2017

its really precise and understandable ans.

Haseeb Chowdhry FEBRUARY 11, 2017

Shweta FEBRUARY 8, 2017

Thank you sir.

Shweta JANUARY 25, 2017

Very Informative and well written. Thank You!

mamta sharma JANUARY 20, 2017

Haseeb Chowdhry JANUARY 20, 2017

Vijay Gowda JANUARY 19, 2017

All are use full questions & Answers. Thank u

Haseeb Chowdhry JANUARY 19, 2017

RAMESH Chauhan JULY 25, 2017

Want to connect directly for more interviews questions and answers

Haseeb Chowdhry JULY 27, 2017