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Financial Analyst Interview Questions and Answers
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Explain one financial concept to me.
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Break even point, this would be the analysis to determine the point at which revenue received equals the costs associated with receiving the revenue.
Money measurement concept.
% of completion method: This method is used in construction contracts in which revenue is accrued in line with % of completion method which will be in line with cost spent in actuals.
Revenue recognition: concept that revenue can only be recognized when all the steps to act on behalf of the company have been met.
Risk versus Return Payoff, its where higher risk products yield higher rates of return. Higher risk investments could be in startup companies, or emerging markets. Taking lower risk typically yields lower rates of return. Market driven products usually have higher rate of return, whereas bonds, or other relatively guaranteed products have lower yields.
The risk/return tradeoff could easily be called the "ability-to-sleep-at-night test." While some people can handle the equivalent of financial skydiving without batting an eye, others are terrified to climb the financial ladder without a secure harness. Deciding what amount of risk you can take while remaining comfortable with your investments is very important.
The matching principle is a fundamental accounting rule for preparing an income statement. It simply states, “Match the sale with its associated costs to determine profits in a given period of time—usually a month, quarter, or year.” In other words, one of the accountants’ primary jobs is to figure out and properly record all the costs incurred in generating sales, including the cost to make and deliver the product and the sales and administrative support. Because of the matching principle, the expenses on the statement are not necessarily those things that we purchased that month, or even paid for that month.
Dividends: improves total return. I also look at the dividend payout ratio to review the strength of the company to payout its dividend.
The risk/return tradeoff This is the balance between the desire for the lowest possible risk and the highest possible return.
The London fixed price of gold is a daily process in which major investment banks, on behalf of their clients, will buy and sell gold and push the prices up or down. This happens twice a day, which makes the price of gold driven by supply and demand.
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