MockQuestions

Finance Mock Interview

To help you prepare for your Finance interview, here are 32 interview questions and answer examples.

Finance was written by and updated on June 13th, 2018. Learn more here.

Question 1 of 32

If you were the CFO, what would keep you up at night?

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.

Written by Bobbi Witt

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List of 32 Finance Interview Questions & Answers

  • 1.

    If you were the CFO, what would keep you up at night?

      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.

      Written by Bobbi Witt

      Entry Level

      "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."

      Written by Bobbi Witt

      Experience

      "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."

      Written by Bobbi Witt

  • 2.

    If you could pick one stock, which would it be and why?

      How to Answer

      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.

      Written by Bobbi Witt on June 18th, 2018

      Experience

      "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."

      Written by Bobbi Witt on June 18th, 2018

  • 3.

    What is deferred tax liability and what is its purpose?

      How to Answer

      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.

      Written by Bobbi Witt

      Entry Level

      "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."

      Written by Bobbi Witt

      Experience

      "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."

      Written by Bobbi Witt

  • 4.

    What is the difference between cash base accounting and accrual accounting?

      How to Answer

      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.

      Written by Bobbi Witt

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  • 5.

    Explain to me what Beta is in your own words? Why is it so important?

      How to Answer

      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.

      Written by Bobbi Witt on June 18th, 2018

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  • 6.

    When should a company consider issuing debt instead of equity?

      How to Answer

      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.

      Written by Bobbi Witt

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  • 7.

    If I could use only one financial statement to review the overall health of the company, which statement would I use and why?

      How to Answer

      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.

      Written by Bobbi Witt

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  • 8.

    Tell me an idea or suggestion you have made that was implemented in the finance area?

      How to Answer

      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.

      Written by Bobbi Witt on June 18th, 2018

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  • 9.

    Have you ever had a conflict with a boss? How was it resolved?

      How to Answer

      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.

      Written by Bobbi Witt on June 18th, 2018

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  • 10.

    How is the income statement linked to the balance sheet?

      How to Answer

      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.

      Written by Bobbi Witt on June 18th, 2018

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  • 11.

    Why are increases in accounts receivable a cash reduction on the cash flow statement?

      How to Answer

      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).

      Written by Bobbi Witt

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  • 12.

    A company purchases new equipment, walk me through the impact on the 3 financial statements.

      How to Answer

      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.

      Written by Bobbi Witt on June 18th, 2018

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  • 13.

    How is it possible for a company to show positive net income but go bankrupt?

      How to Answer

      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.

      Written by Bobbi Witt on June 18th, 2018

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  • 14.

    Is it possible for a company to show positive cash flows but be in grave trouble?

      How to Answer

      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.)

      Written by Bobbi Witt on June 18th, 2018

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  • 15.

    What is a Stock Split and Stock Dividend?

      How to Answer

      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....

      Written by Bobbi Witt on June 18th, 2018

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  • 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?

      How to Answer

      This answer is very straight forward, so do not get hung up on it: The direct write-off method allows a business to record Bad Debt Expense only when a specific account has been deemed uncollectible. The account is removed from the Accounts Receivable balance and Bad Debt Expense is increased. Accounts Receivable on the balance sheet will be debited by $20k and Bad Expense on the income statement gets debited $20k.

      Written by Bobbi Witt

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  • 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?

      How to Answer

      These two questions are asking for the same type of answer and will be one of the first questions asked in an interview. the interviewee needs to very clear and concise. Your answer will be a balance between actual experience/education and soft skill answer. It's best to be honest. To answer this question start off by naming one or two strengths you possess that will be important in this role.

      Ensure you have thoroughly read the job description in great detail and take two job requirements and give an example of your experience, strength, or education/certification.

      Written by Bobbi Witt

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  • 18.

    What effect would an increase in accounts receivable have on the cash flow statement?

      How to Answer

      If the business is using the indirect method, then the cash flow statement will be impacted if AR is increased or decreased. The cash flow statement shows how cash changed from the end of last year to the end of this year. In order to calculate this, we need a starting point.

      The general rule of thumb is that assets are indirectly related to their change in balances whereas liabilities are directly related to their change in balances.

      Written by Bobbi Witt

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  • 19.

    What is goodwill and why do companies use it?

      How to Answer

      The goodwill of a business is typically determined by subtracting the fair market value of the tangible assets from the total business value. Business goodwill is also determined by the capital surplus earnings method, which calculates the fair market value of the business assets, determines the fair rate of return on said assets and subtracts the return from the company's total earnings. The resulting excess earnings is the goodwill of the company.

      Written by Bobbi Witt

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  • 20.

    What is a deferred tax asset and what is its purpose?

      How to Answer

      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.

      Examples of how to answer the question:
      1. A deferred tax asset is when a company pays more in taxes to the IRS than they actually owe. My past company recognized deferred tax when.....

      2. A deferred tax asset is when a company pays more in taxes to the IRS than they actually owe. I studied this in my accounting and a scenario would be when a company.....

      3. A deferred tax asset is when a company pays more in taxes to the IRS than they actually owe. In my experience, deferred tax recognized by a company because....

      Written by Bobbi Witt on June 18th, 2018

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  • 21.

    If a company buys an asset, walk me through the impact on the 3 financial statements? The asset value is $1 million

      How to Answer

      To answer this question, give a made up situation or a real-life scenario based on experience. An entry-level answer will be 3-4 sentences and an experienced answer should provide much detail. If you were to be unsure and get stuck answering this question, just remember the basics of how an asset affects the balance sheet first and start there. In an interview, even the best and smartest people get nervous and forget stuff. This is a basic question to understand the very first financial statement that would be impacted by this purchase.

      Written by Bobbi Witt on June 18th, 2018

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  • 22.

    Have you heard of DCF method? If so, what is it and what does it measure?

      How to Answer

      In finance, discounted cash flow (DCF) analysis is a method of valuing a project, company, or asset using the concepts of the time value of money. All future cash flows are estimated and discounted by using cost of capital to give their present values. The DCF is a valuation tool used to find the intrinsic value.

      If you are new in accounting and finance career, you might get asked basic terminology questions and how its relevant to a business in the interview. The reason this is done, is to ensure the person understands the concept.

      Written by Bobbi Witt on July 19th, 2018

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  • 23.

    What happens on the income statement if inventory goes up by $10? Assuming you paid for it with cash.

      How to Answer

      On the Cash Flow Statement, Inventory is an asset so that decreases your Cash Flow from Operations - it goes down by $10, as does the Net Change in Cash at the bottom. On the Balance Sheet under Assets, Inventory is up by $10 but Cash is down by $10, so the changes cancel out and Assets still equals Liabilities & Shareholders' Equity. There are no changes to the Income Statement. This is a trick question.

      Written by Bobbi Witt

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  • 24.

    Explain what is the most complex work you have done in Excel?

      How to Answer

      This is a question that will give you an opportunity to showcase your Excel knowledge. Excel is something that will be used every day, so being comfortable is a must. If you know VBA, macros, pivot tables, how to create a macro shortcut button or any other advanced level knowledge. Explain any type of project that you have done both professionally or educationally. Here are some examples of applications of Excel that you might want to talk about, if applicable:

      1. Constructing dashboards in Excel to measure and track business metrics;
      2. Putting together cash flow or revenue projections over time;
      3. Using Excel as a project management dashboard to track progress across multiple workstreams;
      4. Automating day-to-day tasks using spreadsheets with IF statements and other conditional logic; or
      5. Performing back-of-the-envelope calculations to estimate sales volume in various business scenarios.

      Written by Bobbi Witt on June 18th, 2018

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  • 25.

    What is working capital?

      How to Answer

      Technically working capital Working Capital = Current Assest - Current Liabilities
      In short It is Excess of Current Assets minus Current Liabilities which can be utilised as a Working Capital to run the Day today business.

      Written by Bobbi Witt on July 19th, 2018

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  • 26.

    Tell me how to create a budget?

      How to Answer

      This is a subjective question so take a few seconds to think and gather your thoughts. Showcase your knowledge of what information is needed to create a budget and why you need the information. Answer why the information is relevant. When someone is in an interview, the mind can go blank (d. Think logically on how to answer this question and what are the basic information needed to do a budget. When in doubt use the KIS method (Keep IT Simple) and do not overthink the question. The whole idea of an interview and this type of question will allow the interviewer the ability to to see how the interviewee, reacts to the question and if they can think on their feet. Slow down and think about the answer.

      Written by Bobbi Witt on June 18th, 2018

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  • 27.

    Walk me through the financial statements?

      How to Answer

      Be careful on this question. Do not say too much if you do not know each of the financial statements. This is truly a make or break question. Anyone that can not answer this question, will not be hired and the interview will be over very quickly. If someone has a finance or accounting degree or has professional experience, the expectation any interviewer will have is the person knows about the financial statements. What's important is the interviewee can tell the interviewer how they have used each statement in their work experience, or in a educational class and how they are relevant. To seal the deal on this answer, explain how all of them tie together.

      Written by Bobbi Witt

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  • 28.

    What is your experience level in working with CI or CIP?

      How to Answer

      CI or CIP stands for Capital improvement or Capital Improvement Process. This is a project the company is investing in and generally its over $5000. All costs and expenses are reported on the spreadsheet until the asset is put into service. Provide the definition in your own words and an example.

      Written by Bobbi Witt on July 19th, 2018

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  • 29.

    Do you find finance and accounting to be similar or different?

      How to Answer

      This is not a question to spend a lot of time on. Give your opinion and state why in 2-4 sentences and then an example from one's education or professional experience. Make sure you are very clear. Finance and Accounting have many similarities, but they are different disciplines.

      Written by Bobbi Witt on June 18th, 2018

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  • 30.

    Give me an example of how WACC can be used in a business?

      How to Answer

      For this question give the technical definition and an example either professionally or educationally of when you have measured it. WACC is the weighted average cost of capital and is a financial metric used to measure the total cost of all capital sources: preferred shares, common shares, and debt.



      If you are new in accounting and finance career, you might get asked basic terminology questions and how its relevant to a business in the interview. The reason this is done, is to ensure the person understands the concept.

      Written by Bobbi Witt on July 19th, 2018

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  • 31.

    What is financial modeling? Do you have experience doing any type of financial modeling? If so, tell me about it?

      How to Answer

      Give a technical definition of financial modeling in your own words and then give an example of your experience with financial modeling. If you do not have any experience that is okay, but always be honest. Most students coming out of college have experience with financial modeling projects, so I would be very surprised if a college graduate did not do a financial modeling project to discuss. Financial Modeling and forecasting is simply What If scenarios (what if the company wants to pay down debt with more cash? what if the company wants to have a price increase on goods?, etc.) Key words to include in your description are: spreadsheet, what if scenarios, Use INDEX AND MATCH instead of V-lookup to query data, use the CHOOSE function to build the scenarios, and make sure to know the difference between inputs and outputs. Don't forget to mention any type of 3D modeling experience (Any employer will find this to be a strength).

      Written by Bobbi Witt

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  • 32.

    What is ROI? Give an example of how your past employer measured ROI?

      How to Answer

      The answer to this question is very straightforward. Literally give the definition of ROI. Then provide an example of when you used ROI in your professional experience or in your educational classes. If you do not have any personal experience and have been working in the finance field for a few years, then provide an example of how your current or previous employer uses ROI.

      Written by Bobbi Witt

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