Tell me what you know about different valuation methods.
Financial analysts are frequently called upon to determine the valuation of a company or asset. There are various ways to do this, and the interviewer wants to know that you are aware of these different methods. Talk through the valuation techniques you're familiar with, and, if possible, give examples of times when you've used them in the past.
"There are several different ways that one can determine the valuation of a business or asset. Since I've been a financial analyst in the fintech field for several years now, I've had the opportunity to use three methods in particular: cost approach, market approach, and the discounted cash flow approach. The cost approach takes into account what it costs to rebuild or replace an asset, which can then be used to value a stock. The market approach, meanwhile, relies on public company comparables and precedent transactions. Finally, the discounted cash flow approach forecasts future cash flows and then discounts it back to today at the company's weighted average cost of capital (WACC). It's the most detailed approach but many times its outcome is the most accurate."