{"id":6301,"date":"2019-08-30T07:32:40","date_gmt":"2019-08-30T07:32:40","guid":{"rendered":"https:\/\/35.154.138.233\/imarticus\/?p=6301"},"modified":"2025-09-01T05:07:00","modified_gmt":"2025-09-01T05:07:00","slug":"finance-interview-questions","status":"publish","type":"post","link":"https:\/\/imarticus.org\/blog\/finance-interview-questions\/","title":{"rendered":"Finance Interview Questions"},"content":{"rendered":"

1. What statement would you use to review the overall health of a company, if you could use only one statement?<\/strong><\/h2>\n

To review the overall financial health of a company, I would use the cash flow statement.
\nA cash flow statement measures the overall cash inflow or outflow of a company, which
\ncan help a financial analyst to get an estimate of the amount of working capital needed
\nin a company. It can also set long term or short term financial goals for the company.
\nThe cash flow statement also provides insights as to where money has been spent by
\nthe company.<\/p>\n

2. Is debt cheaper than equity?<\/strong>
\nYes, for a company, debt is cheaper as well as safer than equity for a couple of reasons-
\n\u25cf Tax benefits- The company effectively pays a lesser rate of interest in
\ncomparison to the actual rate, since there is a reduction in taxable profit and tax
\nexpense.<\/p>\n

\u25cf Improvement in financial discipline- Debt sets a bar for each spending, each
\ntransaction in the company. Each financial decision taken for and by the
\ncompany needs to be justifiable, hence spending in debt is limited as compared
\nto equity.
\n
\n3. What would you mean when talking about negative capital?<\/strong>
\nNegative working capital is when the company\u2019s current assets are less than its current
\nliabilities. This is a result of the company having incurred an immense cash outlay. A
\ncompany\u2019s working capital can also negative when there is quite a bit of increase in its
\npayable accounts as a result of a substantial purchase of services from the vendors.<\/p>\n

4. What are the major factors that drive mergers and acquisitions of a company?<\/strong>
\nWhile there are a number of factors that drive mergers and acquisitions, the main driving
\nforce behind two companies merging is profitability in operations and they work better
\nthan when they are pitted against one another. Sometimes a merger or an acquisition
\nbrings more tax benefits for both. Other reasons could include cross-selling to each
\nother, manage the entire target market themselves taking control of a larger percentage
\nin the market, and lesser competition while they are hiring resources for similar roles
\n.
\n5. If you were to lend 100 million dollars to a company, what would be your deciding
\nfactors?<\/strong>
\nAs a moneylender, you would have a couple of deciding factors-
\n\u25cf Credit report- some of the most useful indicators on a credit report can be, the
\nnumber of times a company has defaulted in credit payments or if it has a history
\nof bankruptcy
\n\u25cf Business credit report- to decide what the credit utilization ratio is, how fast
\ncredits lent by previous money-lenders have been cleared
\n\u25cf Debt to income ratio- the lower the debt to income ratio of a company, the better.
\nHigher income to debt ratio might mean a higher payment forfeiting risk.
\n
\n6. What is the difference between expense models and quarterly forecasting?<\/strong>
\nAn expense model represents a budget plan. It identifies a company\u2019s variable and fixed
\ncosts and presents the information in an easy to understand, readable and editable
\nformat. A company\u2019s expense model accurately forecasts its profit or loss.
\nQuarterly forecasting, on the other hand, is the accumulation and study of data for a
\nperiod of 3 months or 90 days, to create financial statements that predict future
\ninformation for a company in monetary, performance or business terms.<\/p>\n

7. What are the three major sources of short-term finance that a company can use?<\/strong>
\nThe three important sources of short term finance for a company include-
\n\u25cf Bank loans- Commercial banks are a good option for short term financing for a
\ncompany. A company can either opt for single, lines of credit or end-of-period
\npayment loan options while choosing from bank loans.
\n\u25cf Commercial papers- Commercial papers are not-so-secure but cheaper short-
\nterm debt options. These are either dealer papers (dealers charging service fee)
\nor direct papers (investors buying security directly from the company).
\n\u25cf Secured financing- This is often a risky form of short-term finance. The company
\nhas to pledge an asset as a form of collateral for the loan, which acts as a
\nsecured debt to the creditor or bank that lends the money.
\n
\n8. How does a cash flow statement work?<\/strong>
\nA cash flow statement essentially works in the order of explaining to the investors where
\nthe company\u2019s money is coming from, what is the amount of money spent by the
\ncompany and how well or poor its operations are running. It is a financial statement that
\nsums up the cash inflow and outflow of a company and has the following main elements
\ndetermining its factors-
\n\u25cf Cash from operations
\n\u25cf Cash from investments
\n\u25cf Cash from finances
\n\u25cf Non-cash activity disclosure<\/p>\n

9. What would you mean when talking about discount cash flow management?<\/strong>
\nDiscount cash flow or DCM is the model or management method to estimate the
\nvaluation of an investment. This evaluation is completely made on the basis of an
\nestimate of the company\u2019s future cash flows which are then discounted back to a more
\ncurrent value using the time-value of money.<\/p>\n

10. If you were to issue stocks for a start-up, what is the kind you would go for?<\/strong>
\nIn case of a start-up, issuing stocks, there would be two kinds-
\n\u25cf Common stock- type of corporate equity where dividend vary from one
\nshareholder to another. This is generally issued to employees and founders.
\n\u25cf Preferred stock- type of stock that allows the stockholder to be entitled to a fixed
\ndividend. This is generally issued to investors.<\/p>\n

11. Explain the difference between investment management and asset management?<\/strong><\/p>\n

Investment management is the managing and handling of financial assets along with
\nother investments. This does not only include buying and selling of assets but also
\nbuilding plans for banking, setting budgets or devising tax duties and responsibilities.
\nAsset management is the managing of investments on behalf of clients. It includes
\nstatistical analysis of what kind of investments would help the client\u2019s portfolio grow and
\nwhat investments a client needs to avoid.<\/p>\n

12. Explain the concept of secondary market.<\/strong>
\nA secondary market is where investors trade second hand listed securities like stocks
\nand bonds. Unlike primary market, where sales contribute to the company\u2019s capital,
\nsales from the secondary market go to the investor.<\/p>\n","protected":false},"excerpt":{"rendered":"

1. What statement would you use to review the overall health of a company, if you could use only one statement? To review the overall financial health of a company, I would use the cash flow statement. A cash flow statement measures the overall cash inflow or outflow of a company, which can help a […]<\/p>\n","protected":false},"author":1,"featured_media":6368,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_mo_disable_npp":"","_lmt_disableupdate":"no","_lmt_disable":"","footnotes":""},"categories":[22],"tags":[5568],"class_list":["post-6301","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-finance-interview-questions"],"acf":[],"aioseo_notices":[],"modified_by":"Imarticus Learning","_links":{"self":[{"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/posts\/6301","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/comments?post=6301"}],"version-history":[{"count":1,"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/posts\/6301\/revisions"}],"predecessor-version":[{"id":270524,"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/posts\/6301\/revisions\/270524"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/media\/6368"}],"wp:attachment":[{"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/media?parent=6301"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/categories?post=6301"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/imarticus.org\/blog\/wp-json\/wp\/v2\/tags?post=6301"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}