MockQuestions MockQuestions
Interviews Questions by Career
Interviews Questions by Company
Interviews Questions by Topic
Get Started
Interview Coach 1:1
Gain the confidence you need by asking our professionals any interview scenario, question, or answer you are unsure about.
Let Us Review Your Answers
Our interviewing professionals will gladly review and revise any answer you send us. Allowing you to craft perfect responses for your next job interview.
Interview Questions by Topic
Interview Questions by Career
Interview Questions by Company

Finance Interview
Questions

32 Questions and Answers by Bobbi Witt

Updated July 19th, 2018 | Bobbi has been a finance manager for over 15 years, with direct recruiting and hiring experience in her field.
Question 1 of 32
If you were the CFO, what would keep you up at night?
View Answers
How to Answer
This is one of the standard finance interview questions and can be given at any finance job level. Step back and give a high level overview of the company's current financial position. Highlight something on each of the three financial statements. Income statement: growth, margins, profitability. Balance sheet: liquidity, capital assets, and credit metrics. Can flow statement: short term and long term cash flow projection, and need to raise money or return capital.
32 Finance Interview Questions
Win your next job by practicing from our question bank. We have thousands of questions and answers created by interview experts.
  1. If you were the CFO, what would keep you up at night?
  2. If you could pick one stock, which would it be and why?
  3. What is deferred tax liability and what is its purpose?
  4. What is the difference between cash base accounting and accrual accounting?
  5. Explain to me what Beta is in your own words? Why is it so important?
  6. When should a company consider issuing debt instead of equity?
  7. If I could use only one financial statement to review the overall health of the company, which statement would I use and why?
  8. Tell me an idea or suggestion you have made that was implemented in the finance area?
  9. Have you ever had a conflict with a boss? How was it resolved?
  10. How is the income statement linked to the balance sheet?
  11. Why are increases in accounts receivable a cash reduction on the cash flow statement?
  12. A company purchases new equipment, walk me through the impact on the 3 financial statements.
  13. How is it possible for a company to show positive net income but go bankrupt?
  14. Is it possible for a company to show positive cash flows but be in grave trouble?
  15. What is a Stock Split and Stock Dividend?
  16. If there is $20,000 of aged accounts receivable that will be fully written off, what impact will this have on each of the financial statements?
  17. Please tell me how your experience would be a fit for this position? or Based upon the job description, what do you find most exciting about this job opportunity?
  18. What effect would an increase in accounts receivable have on the cash flow statement?
  19. What is goodwill and why do companies use it?
  20. What is a deferred tax asset and what is its purpose?
  21. If a company buys an asset, walk me through the impact on the 3 financial statements? The asset value is $1 million
  22. Have you heard of DCF method? If so, what is it and what does it measure?
  23. What happens on the income statement if inventory goes up by $10? Assuming you paid for it with cash.
  24. Explain what is the most complex work you have done in Excel?
  25. What is working capital?
  26. Tell me how to create a budget?
  27. Walk me through the financial statements?
  28. What is your experience level in working with CI or CIP?
  29. Do you find finance and accounting to be similar or different?
  30. Give me an example of how WACC can be used in a business?
  31. What is financial modeling? Do you have experience doing any type of financial modeling? If so, tell me about it?
  32. What is ROI? Give an example of how your past employer measured ROI?
15 Finance Answer Examples
1.
If you were the CFO, what would keep you up at night?
This is one of the standard finance interview questions and can be given at any finance job level. Step back and give a high level overview of the company's current financial position. Highlight something on each of the three financial statements. Income statement: growth, margins, profitability. Balance sheet: liquidity, capital assets, and credit metrics. Can flow statement: short term and long term cash flow projection, and need to raise money or return capital.
Bobbi's Answer #1
"The cash flow and running out of cash would be my biggest fear. The income and balance sheet are resources and tools that are just as important, but running out cash would simply bankrupt the company."
Bobbi's Answer #2
"Running out of cash would be my biggest nightmare. Many companies have a yearly cash forecast built up by month, but also supplement it with a 13 week cash flow projection. Some of the things they're doing to help them manage cash are: expanding lines of credit and other debt facilities and managing accounts receivable and accounts payable days outstanding in order to speed up the cash flow cycle. Additionally, many with companies in the start up and growth stages are always working on their next round of funding to insure the company won't run out of money.

Secondly, ensuring the right financial people are hired and retaining them Finding good people is always difficult and networking with peers seems to be the best way to find good people in financial circles. Retaining good people requires proper training and a good CFO should be giving adequate time to this."
2.
If you could pick one stock, which would it be and why?
Even if you don't have a preferred stock, you've likely discussed various stocks and their performance during economics classes or at a previous internship. In order to make sure that you give a comprehensive answer, pick a stock that reflects something about you. For example, if you have high-risk tolerance, mention this and explain why it's a key factor in your decision-making process.
Bobbi's Answer
"I'm interested in growth because I'm young and my risk tolerance is higher. Companies that pay dividends don't appeal to me because I don't need the recurring income, as I have a job to pay my bills. I would rather see companies use that money to fuel their growth in the short and long term. If we're looking at today, with all the uncertainty abroad, I would want to stick to a US-based stock, and I feel that with it being an election year, it has brought volatility into the market for opportunistic investments at specific times. I'm specifically interested in tech, and Netflix recently reported their earnings. They beat estimates on revenue and earnings, but missed widely on new subscriber growth, sending the stock down 16%. I think this signals a great buying opportunity, as Netflix still has a large market to capture abroad, and these headwinds are a short-term issue. Overall, long-term I feel the company is well positioned to significantly increase their growth and market share abroad. In conclusion, I wouldn't want a single stock to be more than 3-5% of my overall portfolio, as it is not advisable to over-invest in one specific equity, no matter how bullish I might be.

One key thing to remember is that there is no set response when it comes to determining which stock to invest in. What is important is picking a stock that you can stand behind and convincingly talking about the factors that influenced your decision. This is likely to impress the interviewer and get you one step closer to landing your dream job."
3.
What is deferred tax liability and what is its purpose?
On a balance sheet, a tax that a company will owe on its income, but that has not yet been assessed. Because of differences between tax regulations and the GAAP, income may be recognized on a balance sheet for accounting purposes, but not for tax purposes. However, that income will eventually be recognized for tax purposes and income tax will then be assessed. This tax is called deferred income tax, and is recorded as a liability on the balance sheet.
Bobbi's Answer #1
"A deferred tax liability is a tax that is assessed or is due for the current period but has not yet been paid. The deferral comes from the difference in timing between when the tax is accrued and when the tax is paid. A deferred tax liability records the fact the company will, in the future, pay more income tax because of a transaction that took place during the current period, such as an installment sale receivable."
Bobbi's Answer #2
"Deferred Tax Liability (DTL) is reported on a firm's balance sheet and represents the net difference between the taxes that are paid in the current accounting period and the taxes that will be paid in the next accounting period. The liability occurs when the accounting income is greater than the taxable income.

For an example, a company is allowed to defer taxes on a percentage of its income and report this amount as a DTL on its balance sheet. When the tax is due, there will be an equal amount reduction in the DTL item and the cash and cash equivalents account on the balance sheet. In other words the DTL means an accrued tax on the books because book expenses did not match tax deductions for a particular year."
4.
What is the difference between cash base accounting and accrual accounting?
Give a brief definition in your own words of cash base accounting and accrual accounting.
For Cash basis accounting, revenue is recorded when cash is received from customers, and expenses are recorded when cash is paid to suppliers and employees. For Accrual basis, revenue is recorded when earned and expenses are recorded when consumed. The timing difference between the two methods occurs because revenue recognition is delayed under the cash basis until customer payments arrive at the company. Similarly, the recognition of expenses under the cash basis can be delayed until such time as a supplier invoice is paid.
Bobbi's Answer #1
"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 cash flows. Accrual based accounting is the more popular method."
Bobbi's Answer #2
"I have only worked at companies that have used accrual accounting, meaning all revenue and expenses are recorded when they are incurred. Cash based accounting is recorded when the cash flows in and out of the business. An example of cash based and accrual accounting on the revenue side is: A company sells $10,000 of green widgets to a customer in March, which pays the invoice in April. Under the cash basis, the seller recognizes the sale in April, when the cash is received. Under the accrual basis, the seller recognizes the sale in March, when it issues the invoice.

An example of cash based and accrual accounting on the expense side is: A company buys $500 of office supplies in May, which it pays for in June. Under the cash basis, the buyer recognizes the purchase in June, when it pays the bill. Under the accrual basis, the buyer recognizes the purchase in May, when it receives the supplier's invoice.

The cash basis is only available for use if a company has no more than $5 million of sales per year (as per the IRS). It is easiest to account for transactions using the cash basis, since no complex accounting transactions such as accruals and deferrals are needed. Given its ease of use, the cash basis is widely used in small businesses. However, the relatively random timing of cash receipts and expenditures means that reported results can vary between unusually high and low profits."
5.
Explain to me what Beta is in your own words? Why is it so important?
Give the definition of Beta in your own words:

1. The beta of a company measures how the company's equity market value changes with the change of market overall. It is used in the Capital Asset Pricing Model (CAPM) to estimate the return of an asset.

2. Beta is an expression of how volatile an investment is compared to the overall market.
Bobbi's Answer #1
"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 then the market have a bet greater then 1 and those that are less volatile have a beta less then 1."
Bobbi's Answer #2
"Beta is an expression of how volatile an investment is compared to the overall market. A beta of 1 indicates that the investment will move with the market. A beta of less than 1 means that the investment will be less volatile than the market. For example, if a stock's beta is 1.3, then theoretically it's 30% more volatile than the broad market. Beta can help investors choose investments that match their specific risk preferences. A risk-averse investor, for example, may want to avoid overweighting their portfolio with high-beta stocks to avoid excessive volatility."
6.
When should a company consider issuing debt instead of equity?
Businesses often need external money to maintain their operations and invest in future growth. There are two types of capital that can be raised: debt and equity. Each type has its share of benefits and drawbacks.

Debt financing is capital acquired through the borrowing of funds to be repaid at a later date. Common types of debt are loans and credit. In addition, payments on debt are generally tax-deductible. The downside of debt financing is that lenders require the payment of interest, meaning the total amount repaid exceeds the initial sum. Also, payments on debt must be made regardless of business revenue (during economic slowdowns, slow down in sales, or new companies) this can be dangerous.

Equity financing refers to funds generated by the sale of stock. The main benefit of equity financing is that funds need not be repaid. Shareholders purchase stock with the understanding that they then own a small stake in the business. The business is then beholden to shareholders and must generate consistent profits in order to maintain a healthy stock valuation and pay dividends. Since equity financing is a greater risk to the investor than debt financing is to the lender, the cost of equity is often higher risk than the cost of debt.
Bobbi's Answer #1
"Debt is preferable for the following reasons:
1. Debt is less risky and a cheaper source of financing
2. Debt financing provides a tax shield, meaning payments on debt are generally tax deductible.
3. It helps the company to maximize the return on invested capital (financial leverage)."
Bobbi's Answer #2
"Debt is cheaper because it is paid before equity and has collateral backing. Debt ranks ahead of equity on liquidation of the business when comparing the cost of debt to the cost of capital

There are pros and cons to financing with debt vs equity that business needs to consider. It is not automatically a better to use debt financing simply because it's cheaper. A good answer to the question may highlight the tradeoffs, if there is any followup required."
7.
If I could use only one financial statement to review the overall health of the company, which statement would I use and why?
Pick a good answer to this question with justification. There is not a right or wrong answer to this question. I have listed two answers below:

1. Cash is king. The cash flow statement gives a true picture of how much cash the company generates. Ironically, it often gets the least attention.

2. The balance sheet because assets are the true driver of cash flow.
Bobbi's Answer #1
"Cash is king The cash flow statement gives a true picture of how much cash the company generates. Ironically, it often gets the least attention. That being said, it's important to view all three statements to truly get a full picture of the health of a company."
Bobbi's Answer #2
"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. 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 heal thing cash balance and this will show on the cash flow statement."
8.
Tell me an idea or suggestion you have made that was implemented in the finance area?
It's important here to focus on the word implemented. There's nothing wrong with having a lot of ideas, but they need to be vocalized. Be prepared with a story about an idea of yours that was take from idea to implementation and considered successful.

This is always a good question to showcase a person's thought process and ability to work with others.
Bobbi's Answer #1
"At my previous work, I had the idea to dedicate a few hours on Fridays to reviewing our efficiency. Our workload was lighter on Fridays anyway, so we were able to spend some time improving our work. I also implemented a cross-training program, which is still in practice. I was very interested in improving training, accountability, and efficiency if someone was absent (especially on the payroll side)."
Bobbi's Answer #2
"As a Controller and a senior level manager's, I'm in a position to not only have ideas, but to implement my ideas. On the flip side, I have to remain open to hear my employees ideas as well and to evaluate and implement new practices as well. I have found that listening to employees ideas and trying them ( if realistic), helps build morale, and cohesiveness within the office environment."
9.
Have you ever had a conflict with a boss? How was it resolved?
Do not say no! Most interviewers will keep drilling deeper to find a conflict. The key is how you behaviorally reacted to conflict and what you did to resolve it. Your answer to this question might determine whether you get the job, so be careful to avoid making the following blunders: Don't give examples in which you and the manager had to stop working together entirely. Rather than criticizing a past manager, let the objective facts speak for themselves. If possible, try to discuss a conflict or dispute that did not stem from questionable behaviors on your own part.

Don't allude to frequent conflicts; this can give the impression that this is an issue you regularly face.

Try to avoid displaying a negative attitude when you give your answer, as this could lead a manager to think that you would bring a similar outlook on this job.
Bobbi's Answer #1
"I had a conflict with a manager earlier in my career. One of our team members skipped out on work six times in one month, and I was always asked to cover their shift last minute. I was frustrated and could not understand why my manager wasn't just terminating the employee. I reacted hastily, and the manager patiently reminded me that he had his reasons. He explained that he asked me to cover the shifts because he liked me and I was reliable. It turns out the absent employee had serious health concerns, and our manager was trying to be empathetic without disclosing the situation to our team. I felt terrible and learned that sometimes things aren't always as they seem. I apologized, and all was well."
Bobbi's Answer #2
"Yes, I have had conflict in the past. Never major ones, but there have been disagreements that needed to be resolved. I've found that when conflict occurs, it helps to fully understand the other person's perspective, so I can take time to listen to their point of view, and then I seek to work out a collaborative solution."
10.
How is the income statement linked to the balance sheet?
This is a very important question to know how to answer and practice. The question will most likely be asked. It's a quick and short answer. There is not much of an explanation has to be given. This is the type of question that can easily be overlooked and one can overthink the answer. Slow down.
Bobbi's Answer #1
"That's a good question. The two financial statements are linked because net income flows into retained earnings."
Bobbi's Answer #2
"The balance sheet reports a company's assets, liabilities, and owner's equity. Generally, the amount of the owner's equity will have changed from the previous balance sheet amount due to:
the company's net income which flows into retained earning. The owner's additional investments in the business or the owner's withdrawals of business assets."
11.
Why are increases in accounts receivable a cash reduction on the cash flow statement?
This is another brainteaser question, where one needs to stop and think about the relationship between accounts receivable and net income (increasing AR) , and the receiving of the actual cash which impacts the cash flow statement (increases the CFS when cash is received, but decreases the CFS when AR is increased on the income statement).
Bobbi's Answer #1
"Since our cash flow statement starts with net income, an increase in accounts receivable is an adjustment to net income to reflect the fact that the company never actually received those funds."
Bobbi's Answer #2
"When business buys raw materials for manufacturing / ready goods for trading, it pays the supplier cash - Cash Outflow. The raw material is converted into finished goods. At this point, there is an increase in stock (finished goods). Hence, increase in stock is assumed to be cash reduction in cash flow statement. On the other hand, if a good is sold, and there is immediate receipt of cash, then there is cash inflow and it negates the cash outflow that happened initially. If goods are sold on credit, there is no immediate cash inflow. In other words, the cash that was used to buy the goods initially has not returned to the business. Hence, increase in accounts receivables is cash reduction in cash flow statement."
12.
A company purchases new equipment, walk me through the impact on the 3 financial statements.
This is a yes or no answer and there question can be answered either yes or no. I have given two examples of how to answer this question by saying yes. And answering the question by saying no. Either way, both questions are correct, because the financial impact is correct. Using a case scenario question from a class or financial article, would be perfect to answer this question.
Bobbi's Answer #1
"On the Balance Sheet, the Fixed Assets will increase both assets and accumulated depreciation plus cash will decrease (if cash payment) or in the case of a credit purchase, liabilities will increase Accounts/Notes payable.

The Income statement will be impacted with an increase to the deprecation expense.

The Cash Flow statement will increase in the investment activities."
Bobbi's Answer #2
"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 outflow (cash flow 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 flow statement)."
13.
How is it possible for a company to show positive net income but go bankrupt?
The answer to this question will always be yes. No matter the situation, fraud exists in our society and a perfect example is Enron. What happened to Enron is why SOX was passed through legislation. Answer the question and then give an example, but there is not need to get hung up on the answer.
Bobbi's Answer #1
"Absolutely. If a company's accounts receivables continue to increase, but the company is not able to collect on the sale. And the accounts payables continue to increase and the company is unable to make payroll, or even pay-off long-term or short-term debt. Especially if loan notes gradually increase with higher interest rates and the company is able to make the payments or reconsolidate the debt. Or, there is just outright fraud occurring."
Bobbi's Answer #2
"Yes. Two examples include deterioration of working capital (i.e. increasing accounts receivable, lowering accounts payable), and financial shenanigans.

Financial shenanigans acts or actions designed to mask or misrepresent the true financial performance or actual financial position of a company or entity. Financial shenanigans can range from relatively minor infractions involving creative interpretation of accounting rules to outright fraud over many years."
14.
Is it possible for a company to show positive cash flows but be in grave trouble?
This is a question that can easily stump a person, no matter how smart or prepared someone is for an interview. Which is why interviewers love to ask it. Do not get stuck or hung up on this question, no matter the experience level. Just answer the yes or no question and then another sentence to back up your answer, and move onto the next question.

Example:
It sure can. An example involves unsustainable improvements in working capital.

That's a very good question and one that came up in one of my classes and I remember it very well, because I was stumped on the answer at first. (Giving a long explanation as the one above is always a good tip to remember, because it buys the interviewee more time to think about their answer and it doesn't leave a lot of silence as you are preparing to answer the question.)
Bobbi's Answer #1
"Yes. And there are many different ways this can occur. A common explanation for a company with a net loss to report a positive cash flow is depreciation expense. Depreciation expense reduces a company's net income, but it does not involve a payment of cash in the current period.

Another explanation involves accrual accounting. A corporation must report its expenses as they are incurred and that is often before the corporation pays the invoice. For example, a corporation with an accounting year ending December 31 might have a huge expense at the end of 2012, but the invoice is not due until January 2013. The 2012 net income was reduced, but the corporation's cash is not reduced until 2013. These are just two examples, but is very common for the cash flow to be positive."
Bobbi's Answer #2
"Absolutely. An examples involves unsustainable improvements in working capital (a company is selling off inventory and delaying payables), and another example involves lack of revenues going forward in the pipeline."
15.
What is a Stock Split and Stock Dividend?
This question is simply asking for the definition in your own words and give an example. Keep it clear and concise, along with the example.

Here are a few ways to start off the answer:
1. A stock split is when a company splits its stock into 2 or more pieces. For example a 2 for 1 split. I have not worked in a company where there has been a stock split, but an example is....

2. A stock split is when a company splits its stock into 2 or more pieces. For example a 2 for 1 split. Since, I have just graduated from college, an example and scenario studied in my academic class is....

3. A stock dividend occurs when the company uses the amount of money that would be paid as a cash dividend to purchase additional common shares for the shareholder. In my experience, a company chose to split their stock because....
Bobbi's Answer #1
"A stock split is when a company splits its stock into 2 or more pieces. For example a 2 for 1 split. A company splits its stock for various reasons. One of the reasons is to make the stock available for the investors who invest in the stock of the companies which are inexpensive. The probability of growth for those stocks also increases. Stock Dividend is when the company distributes additional shares in lieu of cash as dividends."
Bobbi's Answer #2
"A stock dividend occurs when the company uses the amount of money that would be paid as a cash dividend to purchase additional common shares for the shareholder. A stock split happens when a company issues two or more new shares for every existing share an investor holds. When an investor considers purchasing stock that has issued a stock dividend or that has been split, the investor needs to consider whether the company's goals in issuing a stock dividend or making a stock split match the investor's goals for wanting to invest in the company. If the investor's goals and the company's goals are incompatible, the investor should consider investing in another company. Companies that are pursuing growth will want to keep any cash they have to invest in the company. In this case, a stock dividend is issued.

A stock split occurs when a company feels its stock is above the popular price range for their stock. The company uses the split to bring the stock price into the desired range."
View All 32 Finance Questions and Answers
Sign up to access our library of 50,000+ Q&As,
plus coaches for one-on-one support, so you can interview more confidently.
More Interview Q&As
Explore expert tips and resources to be more confident in your next interview.
Behavioral
Common
Phone
Tough
Leadership
All Interview Topics
All Career Q&As
Disclaimer
Our interview questions and answers are created by experienced recruiters and interviewers. These questions and answers do not represent any organization, school, or company on our site. Interview questions and answer examples and any other content may be used else where on the site. We do not claim our questions will be asked in any interview you may have. Our goal is to create interview questions and answers that will best prepare you for your interview, and that means we do not want you to memorize our answers. You must create your own answers, and be prepared for any interview question in any interview.