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30+ Inflection Point Ventures Interview Questions and Answers
Q1. What is the difference between issued and outstanding shares?
Issued shares are the total number of shares a company has authorized and distributed, while outstanding shares are the shares held by shareholders.
Issued shares refer to the total number of shares a company has authorized and distributed to shareholders.
Outstanding shares are the shares held by shareholders, excluding treasury shares and shares held by insiders.
Issued shares can include both outstanding shares and treasury shares.
Outstanding shares are important for calculat...read more
Q2. What is the relationship between all the 3 financial statements?
The 3 financial statements are interrelated and provide different perspectives of a company's financial performance.
The income statement shows the company's revenues, expenses, and net income for a specific period.
The balance sheet shows the company's assets, liabilities, and equity at a specific point in time.
The cash flow statement shows the company's cash inflows and outflows for a specific period.
The net income from the income statement is used to calculate the retained e...read more
Q3. Stock split vs stock dividend
Stock split increases the number of shares outstanding while reducing the price per share, while stock dividend distributes additional shares to existing shareholders.
Stock split is done to make the stock more affordable for investors and increase liquidity.
Stock dividend is usually given when a company wants to reward its shareholders without giving out cash.
Example of stock split: Apple's 7-for-1 stock split in 2014.
Example of stock dividend: Coca-Cola's 2% stock dividend i...read more
Q4. a reduction in the value of an asset over time, due in particular to wear and tear.
Depreciation is the reduction in the value of an asset over time due to wear and tear.
Depreciation is a non-cash expense that reduces the value of an asset on the balance sheet.
It is calculated by dividing the cost of the asset by its useful life.
Examples of assets that depreciate include vehicles, machinery, and buildings.
Depreciation can be accelerated or slowed down depending on the method used to calculate it.
Depreciation is important for tax purposes as it can reduce tax...read more
Q5. What is Mutual Fund ? different type of Mutual fund?
A mutual fund is a type of investment vehicle that pools money from multiple investors to invest in stocks, bonds, or other assets.
Mutual funds are managed by professional fund managers.
Investors buy shares in the mutual fund and the value of their investment is determined by the performance of the underlying assets.
There are different types of mutual funds, including equity funds, bond funds, money market funds, and index funds.
Equity funds invest in stocks, bond funds inves...read more
Q6. What is PE ratio?
PE ratio is a financial metric used to assess the valuation of a company's stock by comparing its market price to its earnings per share.
PE ratio is calculated by dividing the market price per share by the earnings per share.
It helps investors determine if a stock is overvalued or undervalued.
A high PE ratio suggests that investors have high expectations for future earnings growth.
A low PE ratio may indicate that the stock is undervalued.
For example, if a company's stock is t...read more
Q7. Linkage between balace sheet, income statement and cash flow statement
The balance sheet, income statement, and cash flow statement are interconnected financial statements that provide a comprehensive view of a company's financial performance.
The balance sheet shows a company's assets, liabilities, and shareholders' equity at a specific point in time.
The income statement shows a company's revenues, expenses, and net income over a specific period.
The cash flow statement shows the inflows and outflows of cash from operating, investing, and financi...read more
Q8. What do you mean by shares?
Shares refer to the ownership units of a company that are traded on a stock exchange.
Shares represent a portion of ownership in a company
They are bought and sold on stock exchanges
Shareholders are entitled to a portion of the company's profits and voting rights
Shares can be common or preferred, with different rights and privileges
Examples of companies with shares include Apple, Amazon, and Microsoft
Q9. What do you mean by mutual fund?
A mutual fund is a type of investment vehicle made up of a pool of money collected from many investors to invest in securities.
Mutual funds are managed by professional fund managers.
Investors buy shares in the mutual fund and the value of their investment is determined by the performance of the underlying securities.
Mutual funds offer diversification and are a popular choice for individual investors.
There are different types of mutual funds, including equity funds, bond funds...read more
Q10. Difference between Operational and Financial Lease
Operational lease is short-term and used for equipment rental, while financial lease is long-term and used for asset financing.
Operational lease is like renting equipment for a short period of time
Financial lease is like financing an asset for a longer period of time
Operational lease is usually cheaper and has lower risk
Financial lease is usually more expensive and has higher risk
Operational lease is not recorded on balance sheet, while financial lease is
Examples of operation...read more
Q11. 1. Difference between the Amortization, Depreciation and Depletion. 2. Profitability Ratios 3. Basic and Diluted EPS 4. Zero Coupon Bond
Answers to questions related to finance and accounting.
Amortization is the process of spreading the cost of an intangible asset over its useful life.
Depreciation is the process of allocating the cost of a tangible asset over its useful life.
Depletion is the process of allocating the cost of a natural resource over its usage.
Profitability ratios are used to measure a company's ability to generate earnings relative to its expenses and other costs.
Basic EPS is calculated by divi...read more
Q12. How are all the financial statements related to each other?
Financial statements are interrelated as they provide different perspectives on the financial health of a company.
The income statement shows the company's revenues and expenses, which directly impact the net income on the balance sheet.
The balance sheet provides a snapshot of the company's assets, liabilities, and equity, which are also reflected in the cash flow statement.
The cash flow statement shows how changes in the balance sheet and income statement affect cash and cash...read more
Q13. Difference between Stock Split and Dividend, Operating Lease and Financing Lease, NPA,
Difference between Stock Split and Dividend, Operating Lease and Financing Lease, NPA
Stock split is when a company increases the number of shares outstanding by issuing more shares to current shareholders, while dividend is a payment made to shareholders from a company's profits
Operating lease is a short-term lease where the lessor retains ownership of the asset, while financing lease is a long-term lease where the lessee has the option to purchase the asset at the end of the...read more
Q14. Difference between Market Cap and Enterprise Value Stock Split and Reverse Stock Split
Market Cap is the total value of a company's outstanding shares while Enterprise Value is the total value of a company's equity and debt.
Market Cap is calculated by multiplying the current stock price by the total number of outstanding shares.
Enterprise Value takes into account a company's debt and cash reserves in addition to its market cap.
Stock Split is when a company increases the number of outstanding shares by dividing each share into multiple shares, while Reverse Stoc...read more
Q15. Depreciation vs amortization
Depreciation is the allocation of the cost of tangible assets over their useful life, while amortization is the allocation of the cost of intangible assets.
Depreciation applies to tangible assets like buildings, vehicles, and machinery.
Amortization applies to intangible assets like patents, copyrights, and trademarks.
Depreciation is calculated using methods like straight-line, declining balance, or units of production.
Amortization is usually calculated using the straight-line...read more
Q16. What is Depriciation?
Depreciation is the decrease in value of an asset over time due to wear and tear, obsolescence, or other factors.
Depreciation is a non-cash expense that reduces the value of an asset on the balance sheet.
It is calculated by dividing the cost of the asset by its useful life.
Examples of assets that can be depreciated include buildings, vehicles, and equipment.
Depreciation can be straight-line, accelerated, or based on units of production.
Depreciation is important for tax purpos...read more
Q17. Mention any 2 Liquidity ratios and explain them.
Two common liquidity ratios are current ratio and quick ratio.
Current ratio: Current assets divided by current liabilities. It measures a company's ability to cover its short-term obligations with its short-term assets.
Quick ratio: (Current assets - inventory) divided by current liabilities. It provides a more stringent measure of liquidity as it excludes inventory, which may not be easily convertible to cash in the short term.
Q18. What do you mean by open market operations?
Open market operations refer to the buying and selling of government securities in the open market by a central bank.
Central banks use open market operations to control the money supply and interest rates in the economy.
When a central bank buys government securities, it injects money into the banking system, leading to lower interest rates and increased lending.
Conversely, when a central bank sells government securities, it withdraws money from the banking system, leading to ...read more
Q19. Explain any 2 financial ratios and their relevance.
Two important financial ratios are the current ratio and return on equity.
Current ratio measures a company's ability to pay its short-term obligations with its short-term assets. Formula: Current Ratio = Current Assets / Current Liabilities
Return on equity (ROE) measures a company's profitability by showing how much profit a company generates with the money shareholders have invested. Formula: ROE = Net Income / Shareholders' Equity
Q20. Difference between Depreciation, amortization and impairment
Depreciation is the decrease in value of tangible assets, amortization is the decrease in value of intangible assets, and impairment is the sudden decrease in value of assets.
Depreciation is the allocation of the cost of tangible assets over their useful life.
Amortization is the allocation of the cost of intangible assets over their useful life.
Impairment is the sudden decrease in value of assets due to damage, obsolescence, or other factors.
Depreciation and amortization are ...read more
Q21. How are the three financial statements connected
The three financial statements (income statement, balance sheet, and cash flow statement) are connected through the flow of information about a company's financial performance and position.
The income statement shows the company's revenues and expenses over a period of time, which affects the company's net income.
The net income from the income statement flows into the balance sheet as retained earnings, affecting the company's equity.
The cash flow statement shows how changes i...read more
Q22. what do you understand by venture capital
Venture capital is funding provided by investors to startup companies and small businesses that are deemed to have long-term growth potential.
Venture capital is a type of private equity financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential.
Venture capitalists typically take equity in the company in exchange for their investment.
Venture capital is often used to fund new technologies, expand working capit...read more
Q23. Difference between GAAP and IFRS
GAAP and IFRS are two sets of accounting standards used globally, with GAAP being primarily used in the US and IFRS being used in many other countries.
GAAP (Generally Accepted Accounting Principles) is the accounting standard used in the United States, while IFRS (International Financial Reporting Standards) is used in many other countries around the world.
GAAP is more rules-based, with specific guidelines for how to account for different transactions, while IFRS is more prin...read more
Q24. Difference between revenue and income
Revenue is the total amount of money generated by a business through sales, while income is the profit earned after deducting expenses from revenue.
Revenue is the total amount of money generated by a business from its normal business activities.
Income is the profit earned by a business after deducting expenses such as operating costs, taxes, and interest.
Revenue is the top line of the income statement, while income is the bottom line.
Example: A company generates $1 million in...read more
Q25. What is EPS and explain?
EPS stands for Earnings Per Share, a financial metric that indicates the portion of a company's profit allocated to each outstanding share of common stock.
EPS is calculated by dividing the company's net income by the number of outstanding shares.
It is an important indicator of a company's profitability and is often used by investors to evaluate a company's performance.
Higher EPS indicates higher profitability and potential for growth.
EPS can be diluted or basic, depending on ...read more
Q26. What is enterprise value
Enterprise value is a measure of a company's total value, including debt and equity.
Enterprise value is calculated as market capitalization plus debt, minority interest, and preferred shares, minus total cash and cash equivalents.
It represents the total value of a company that would need to be paid off if the company were to be acquired.
Enterprise value is often used in financial analysis to compare companies with different capital structures.
Formula: Enterprise Value = Marke...read more
Q27. What is interest tax shield
Interest tax shield refers to the tax savings a company receives from deducting interest expenses from its taxable income.
Interest tax shield is a financial benefit that results from the tax-deductibility of interest payments on debt.
It reduces the amount of taxable income, leading to lower tax liability for the company.
The formula to calculate interest tax shield is: Interest Tax Shield = Interest Expense x Tax Rate.
Example: If a company has $100,000 in interest expenses and...read more
Q28. What is Data
Data is a collection of facts, figures, and statistics that can be analyzed to gain insights and make informed decisions.
Data is raw and unorganized information
It can be in various forms such as text, numbers, images, audio, video, etc.
Data can be structured or unstructured
It is used to gain insights, make informed decisions, and solve problems
Examples of data include customer information, sales figures, website traffic, social media posts, etc.
Q29. What are derivatives
Derivatives are financial instruments whose value is derived from an underlying asset or benchmark.
Derivatives can be used for hedging, speculation, or arbitrage.
Common types of derivatives include options, futures, forwards, and swaps.
Derivatives allow investors to gain exposure to various asset classes without owning the underlying assets.
For example, a stock option is a derivative that gives the holder the right to buy or sell a specific stock at a predetermined price.
Deri...read more
Q30. Different presentation of balance sheet
Balance sheet can be presented in vertical or horizontal format, with assets on one side and liabilities and equity on the other.
Balance sheet can be presented in a vertical format, where assets are listed on the left side and liabilities and equity on the right side.
Alternatively, it can be presented in a horizontal format, with assets at the top and liabilities and equity below.
Common sections on a balance sheet include current assets, non-current assets, current liabilitie...read more
Q31. What id spin off?
A spin-off is a new company formed through the sale or distribution of new shares of an existing business division or subsidiary.
Spin-offs are created when a parent company decides to separate a portion of its business into a new entity.
Spin-offs can help unlock value for shareholders by allowing the new entity to focus on its specific market or industry.
Examples of spin-offs include PayPal from eBay, Trivago from Expedia, and AbbVie from Abbott Laboratories.
Q32. Describe about Three Financial Statement
The three financial statements are the income statement, balance sheet, and cash flow statement.
Income statement shows a company's revenues and expenses over a specific period of time.
Balance sheet provides a snapshot of a company's financial position at a specific point in time.
Cash flow statement shows how changes in balance sheet and income statement affect cash and cash equivalents.
Example: Income statement - Revenue: $100,000, Expenses: $70,000, Net Income: $30,000
Exampl...read more
Q33. Basic EPS vs Diluted EPS
Basic EPS is calculated using only outstanding common shares while diluted EPS takes into account the potential dilution from convertible securities.
Basic EPS is a simple calculation that divides net income by the number of outstanding common shares.
Diluted EPS takes into account the potential dilution from convertible securities such as stock options, warrants, and convertible bonds.
The potential dilution is factored in by assuming that all convertible securities are convert...read more
Q34. Ratio Analysis for companies
Ratio analysis is a method of evaluating a company's financial performance by comparing different financial metrics.
Ratio analysis helps in assessing a company's liquidity, profitability, efficiency, and solvency.
Common ratios include current ratio, quick ratio, return on equity, and debt-to-equity ratio.
It is important to compare ratios with industry benchmarks or historical data for better interpretation.
Ratio analysis can help investors, creditors, and management make info...read more
Q35. depreciation and it's types
Depreciation is the decrease in value of an asset over time. Types include straight-line, double declining balance, and units of production.
Depreciation is the allocation of the cost of an asset over its useful life.
Straight-line depreciation evenly spreads the cost of an asset over its useful life.
Double declining balance depreciation accelerates the depreciation expense in the early years of an asset's life.
Units of production depreciation is based on the actual usage of th...read more
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