You're just starting the finance recruiting season.

You're an
undergrad that needs to ace his or her finance job interview. Or
you're a MBA (Masters in Business Administration<br /> ) student
that needs to land that top-notch offer. Most importantly, you're in
luck! We've compiled a list of the most common and frequently
asked finance interview questions.

If you want to ace your finance interview then make sure you review
and perfect the answers to the below questions. This guide is based
on real questions asked at banks, and is curated from Wall Street
Oasis (WSO) global community with over 500,000 members that
have been in your shoes.

In addition to this comprehensive guide to finance interview Q&A,

you might also want to arm yourself with the complete Investment
Banking Interview Prep Package
(https://www.wallstreetoasis.com/guide/investment-banking-
interview-prep-questions) and do some Mock Interviews with
Experienced Wall St. Mentors (https://www.wallstreetoasis.com/wall-
street-mentors-finance-mock-interviews). Check out the full list of
awesome Interview & Recruiting Prep Courses
(https://www.wallstreetoasis.com/guide-to-finance-interviews) from
WSO (Wall Street Oasis<br /> ) for more information.

But if you're looking for just the basic fresher on Finance Interview
questions, look no further!

Behavioral Or Fit Questions At

Finance Interviews
You'll first face behavioral/fit questions. These involve resume
walkthroughs, "Why this industry?" or "Why this firm?" questions,
and "Tell me a time..." questions. Here's how to crack those.

Background or Resume Walkthrough

Prepare a 90 second resume walkthrough that focuses on the

positive motivating factors behind every transition (school to job, job
to better job, most recent job to grad school). For example, "I went to
school to design, but after one internship I realized I liked interacting
with clients directly and pursued full-time roles with a sales role. In
that role, I developed A and B. I wanted to continue honing those
and branch out to focus on C. So, I sought a new role at Morgan
Sachs..."

"Why this" Questions

Why do you want to do finance or investment banking? Why this
firm? Why are you a good fit? Research the firm beforehand - what
their "About Page" focuses on, what values and principles they
abide by. Tailor these answers for each firm or industry and practice
them.

"Tell me About a Time When..."

These are the questions they ask when they want to know about
your leadership, or dealing with a difficult client, or persuading
someone, etc. Here the trick is to answer the right question. For
every question, map out the story using the SOAR framework.
Describe the Situation (10-15 seconds), Obstacle (10-15s), Action
(60-75s), and Result (15-30s). Stories for these questions should be
1.5-2 minutes long and focus only on what's important.

Basic Technical Finance

Interview Questions And
Answers
These are the basic finance questions asked to start off most
technical interviews. Questions may progress to the next section
(Advanced), depending on age and experience.

What are four financial statements?

Income statement (rev-cogs-exp = Net Income)
Balance Sheet (Assets= Liabilities + Shareholder's equity)
Statement of Cash Flows (Beginning Cash + CF from Operations
+ Cash Flow from investing + CF from financing = ending cash)
 Statement of Stockholders' Equity

How are the three main financial

statements connected?
Net income flows from Income Statement into the Cash Flow
from Operations on the CF statement
Net income - dividends is added to retained earnings from the
prior period's Balance Sheet to come up with retained earnings
on this period's Balance Sheet
Beginning Cash on the CF Statement is cash from the prior
period's Balance Sheet and Ending Cash on the CF statement is
Cash on the current period's Balance Sheet

A more comprehensive summary chart:

Walk me through the Income Statement?
The first line of the Income Statement represents revenues or sales.
From that we subtract the cost of goods sold, which gives gross
margin. Subtracting operating expenses from gross margin gives us
operating income (EBIT). We then (add/subtract) interest expense
(income), taxes, and other expenses (income) to arrive at Net
Income.

If you could choose only one statement

to evaluate the financial state of a
company, which would you choose?
The cash flow statement because it shows the actual liquidity of the
company and how much cash it is generating and using. The
balance sheet just shows a snapshot of the company at one time,
without showing the performance of the company, and the Income
statement has a number of non-cash expenses that may not actually
be affecting the company's health. But the key to a great company is
generating significant cash flow and also having a healthy cash
balance and this will show on the CF statement.

What is EBITDA (earnings before

interest tax depreciation and
amortization<br /> )?
Earnings before Interest, Depreciation, Taxes and Amortization.
EBITDA (earnings before interest tax depreciation and
amortization<br /> ) gives a good idea of a company's profitability
and is a quick metric for free cash flow because it will allow you to
determine how much cash is available from operations to pay
interest, capex, etc. EBITDA (earnings before interest tax
depreciation and amortization<br /> ) = Rev-Exp. It can be used in
rough valuation as a metric, such as EV (enterprise value<br />
)/EBITDA (earnings before interest tax depreciation and
amortization<br /> ).

What is Enterprise Value?

Enterprise Value is the value of an entire firm, both debt and equity.
This is the price that would be paid for the company in the event of
an acquisition without a premium. EV (enterprise value<br /> ) =
Market Value of Equity + Debt + Preferred Stock + minority interest -
Cash

Can a company have a negative book

equity value?
Yes. If there are large cash dividends or if the company has been
operating at a loss for a long time.

What are the ways you can value a

company?
Comparable Companies/Multiples Analysis
 Market Cap/Market Valuation
precedent transactions
Discounted Cash Flow (DCF (discounted cash flow<br /> ))
Leveraged Buyout Model (LBO (leveraged buyout<br /> ))
Liquidation Valuation

When does a LBO (leveraged buyout<br

/> ) transaction occur?
Used when firm uses higher than normal amount of debt to finance
purchase of a company, then uses company's cash flows to pay off
debt over time. The acquisiton's assets may be used as collateral.
Ideally, the acquisitions debt has been partially retired at time of exit.

Walk me through a DCF?

Find and predict FCFs during modeling
period.
Free cash flows = EBIT (1-t) + D&A - Capex - Change in NWC
Predict cash flows beyond the term projected. This requires
terminal value (terminal growth Multiple, Perpetuity Method,
Growth Rate)
Once future cash flows have been projected then find PV of CFs
at the WACC (weighted average cost of capital<br /> ).
The final cash flow in year N will be equal to the sum of the
terminal value calculation and the final year's FCF (free cash
flow<br /> ).
What is WACC (weighted average cost of
capital<br /> ) and how do you calculate
it?
Weighted Average Cost of Capital. It reflects the cost of the
company raising new capital and reflects the riskiness of a company.

Why do you project out FCF (free cash

flow<br /> ) for the DCF (discounted
cash flow<br /> ) model?
The reason we project out free cash flows for the DCF (discounted
cash flow<br /> ) is because the FCF (free cash flow<br /> ) is the
amount of actual cash that could be hypothetically be paid out to
debt and equity holders from a company.

What is CAPM (capital asset pricing

model<br /> )?
Used to Calculate the required/expected return on equity. Return on
Equity = Risk free rate + Beta(Market Return - Risk Free Rate)

What is Beta?
Beta is a measure of the volatility of an investment compared with
the market as a whole. The market has a beta of 1, while
investments that are more volatile than the market have a beta
greater than 1 and those that are less volatile have a beta less than
1.

Advanced / MBA (Masters In

Business Administration<Br /> )
Finance Interview Questions
And Answers
These are questions that are also asked for junior-year Summer
Analyst, full-time Analyst, and MBA (Masters in Business
Administration<br /> ) job interviews. These advanced finance
questions require deeper thinking and understanding of corporate
finance.

How does a ten dollar increase in

depreciation expense affect each of the
three financial statements? Assume
taxes are .4
Start with Income Statement (decreases NI by 10 and increases
by tax shield (10*(1-t)) =4) so net income decreases by 6.
Then go to cash flows. Since net income drops by 6 flows from
operations reduce by 6, but we have to add back dep since it is
non cash so +10. This equals an increase by 4.
 Then go to balance sheet (Cash =+4, PP&E down by 10, Assets
fall by 6, retained earnings fall by 6)

Why would a company issue equity

rather than debt to fund its operations?
If the company feels its stock price is inflated they can raise a
large amount of capital compared to percentage of ownership
sold
If the projects the company plans to invest in with proceeds may
not produce immediate or consistent cash flows to pay debt
If the company wants to adjust cap structure or pay down debt
If the owners of the company want to sell off a portion of their
ownership

How/Why do you lever or unlever beta?

By unlevering beta you remove the financial effects of debt in the

capital structure. This will show you the risk of a firm's equity
compared to the market. Also when you have a company that is not
on the market and doesn't have a beta, you can take a company on
the market that is similar and unlever its beta as a proxy for the
unlisted company's beta.

What is the difference between cash-

base accounting and accrual?
Cash based accounting recognizes sales and expenses when cash
actually flows out of the company. Accrual based accounting
recognizes revenues and expenses as they are incurred regardless
of whether cash flows out of the company at that exact time. Accrual
based accounting is the more popular method.

How is it possible for a company to have

positive net income but go bankrupt?
If working capital erodes (such as increasing accounts receivable,
lowering accounts payable), it is possible. Also, financial fraud can
also be a possibility.

What are the major factors that drive

mergers and acquisitions?
To achieve synergies (cost savings)
Diversify or sharpen the focus, market, or products of the
company
Gain new technologies
Eliminate a competitor from the market or grow market share
Increase Supply-Chain Pricing Power by buying a supplier or
distributor
Improve financial metrics and numbers
If you were Chief Financial Officer (CFO)
of a Fortune 500 company, what would
be your concerns? Explain from a high-
level what the long-term financial
implications are for your company.
Highlight different things on each of the three statements:
Income statement: revenue growth, cost and margins, profits
Balance sheet: liquidity ratios, capital assets, credit ratings
Cash flow statement: cash flows in short and long-terms, raising
money

Acing The Finance Interview

It's all about practice, practice, and practice! Make sure your
behavioral stories are planned out, and practiced (but don't sound
too rehearsed!). Practice answering finance technical questions on
the fly, perhaps some Mock Interviews with Experienced Wall St.
Mentors (https://www.wallstreetoasis.com/wall-street-mentors-
finance-mock-interviews) to really get yourself in the zone.

Common Finance Interview

Questions
At the very least, review the most common finance questions and
answers above at least a few times before your first interview.
Nowadays, however, that really isn't enough to set yourself apart
from the competition. If you want to see the complete set of finance
interview questions (over 7,000 to be exact), cases, videos,
templates, tricks, and answers - take a look at the complete
Investment Banking Interview Prep Package
(https://www.wallstreetoasis.com/guide/investment-banking-
interview-prep-questions) too!

Remember, at the end of the day - it'll be you, your preparation, and
your confidence that will win you the interview. Set yourself up to
acing the interview and landing that dream offer! Good luck!

Graphics Disclosure: Background vector created by Brgfx - Freepik.com //

(https://www.freepik.com/free-photos-vectors/background)Designs by
Freepik // (https://www.freepik.com/free-vector/businessmen-over-piles-
of-coins_1076128.htm)Icons made by Freepik (http://www.freepik.com) from www.flaticon.com
(https://www.flaticon.com/) is licensed by CC 3.0 BY (http://creativecommons.org/licenses/by/3.0/) // Edited by

Ajay Patel
About this content

Patrick Curtis (/wall-street-oasis-editorial-board) is a member of

WSO Editorial Board (/wall-street-oasis-editorial-board) which helps ensure
the accuracy of content across top articles on Wall Street Oasis. He
has experience in investment banking at Rothschild and private equity
at Tailwind Capital along with an MBA from the Wharton School of
Business. He is also the founder and current CEO of Wall Street
Oasis. This content was originally created by member
WallStreetOasis.com (/user/1) and has evolved with the help of our
investment banking mentors.

17
%&
! Reply (/comment/reply/369742/nojs?page=0) " Share (/forward?path=node/3697
$ Bookmark (/flag/flag/bookmarks/369742?destination=node/369742&token=PD1ib2r
#

Investment Banking Interview Course

7,548 questions across 469 investment banks. Crowdsourced from over

500,000 members.

Technical, behavioral, networking, case videos, templates. All included.

Most comprehensive IB interview course in the world.

Learn More (Https://Www.wallstreetoasis.com/Guide/Investment-Banking-Interv

Services & Courses

The Talent Oasis (/the-talent-oasis/)

Interview Courses (/finance-interview-courses-wall-street-oasis)

Resume Review (/best-resume-review-service-finance-pros-help-your-cv)

Find a Mentor (/wall-street-mentors-finance-mock-interviews)

Financial Modeling Courses (/financial-modeling-training)

Community

All Forums (/forums)

All Events (/events)

Frequently Asked Questions (/top-frequently-asked-questions)

Finance Dictionary (/finance-dictionary)

WSO Editorial Board (/wall-street-oasis-editorial-board)

Frequently Asked Questions (/frequently-asked-questions)

Data, Reports & Resources

Industry Reports (/industry-reports-wall-street-oasis)

Salary Data (/wso-company-database/salary)

Interview Data (/wso-company-database/interview)

Company Reviews (/wso-company-database/review)

Free Finance Templates (https://www.wallstreetoasis.com/all-wso-templates)

Contact & Legal

About Us (/about-wallstreetoasiscom)

WSO Careers (/wall-street-oasis-careers-internships)

Contact Us (/contact-us)

Terms of Service (/legal)

Privacy Policy (/privacy-policy-wall-street-oasis)

 '
(/tracker) (
(/tracker/top/48-hours) )
(/tracker/top) IB(/forum/investment-banking)

(/) ©2005-2019 Wall(/node/add/forum) (/messages/system) (/user)

* + Street Oasis. All Rights
, -Reserved.26
.