Tell me something about yourself.

Question

Accepted Answer

[Please note that I stands for Interviewer and C stands for Candidate]

C-(Gave the prepared answer covering family background, schooling, graduation, inclination towards management and finance, extra currics and future job plans)

I- When a new idea or product is pitched in front of you, how would you decide whether to go with it or not?

C-  I'll do the financial modelling first taking all necessary assumptions and then forecast the future cash flows. Using the future cash flows, I'll apply NPV or IRR method to decide.

I-  What is difference between NPV and IRR?

C- Told about basic difference in the assumption of uniformity of cash flows. IRR gives contradictory results in case of non uniform cash flows but NPV 
always gives correct result.

I- While discounting the cash flows, what interest rate is used and how is it calculated?

C-  The Required rate of return which is equal to weighted average cost of capital (WACC). It is the weighted average of cost of equity, cost of debt adjusted for tax rate and cost of preferential shares , if any.

I- How is cost of preferential shares calculated?

C- By dividing dividend amount by price of preferential shares.

I- Tell me a case when Cash flows from ops are positive but profits are negative.

C- When lot of non cash expenses (e.g depreciation, abnormal loss like theft or fire) are incurred.

I- Your views on current situation of Indian Economy and govt's steps like tax rate cut.

C- Told about how the tax rate cut is a bold move and should be welcome. It would directly impact the supply side by providing more cash to companies but would indirectly impact the demand side as more cash in hands of companies  might result in increase in disposable income of workers. According to news reports, govt may decrease income tax rates as well to push the demand as well.

Tell me something about yourself.

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