Withum Smith+Brown Interview Questions and Answers

Q1. Walk me through a DCF
Ans. 
A DCF (Discounted Cash Flow) analysis estimates the value of an investment based on its expected future cash flows.
• 1. Project future cash flows: Estimate cash flows for a specific period, e.g., 5-10 years.

• 2. Determine the discount rate: Use WACC (Weighted Average Cost of Capital) to discount future cash flows.

• 3. Calculate the present value: Discount future cash flows back to present value using the formula: PV = CF / (...read more
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Q2. What is FCFF and FCFE?
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FCFF (Free Cash Flow to Firm) and FCFE (Free Cash Flow to Equity) are metrics used to evaluate a company's cash flow.
• FCFF represents the cash available to all investors (equity and debt) after operating expenses and capital expenditures.

• Example: If a company generates $1 million in operating cash flow and spends $300,000 on capital expenditures, FCFF is $700,000.

• FCFE represents the cash available to equity shareholders...read more
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Q3. Why do we use mid-period convention?
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Mid-period convention is used to improve the accuracy of financial calculations by assuming cash flows occur at the midpoint of a period.
• It provides a more accurate representation of cash flows over time.

• For example, if cash flows occur at the beginning or end of a period, mid-period convention averages these effects.

• This method is particularly useful in discounted cash flow (DCF) analysis.

• By assuming cash flows occur ...read more
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Q4. How is terminal value calculated?
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Terminal value estimates a company's value beyond a forecast period, often using perpetuity or exit multiple methods.
• Terminal value can be calculated using the Gordon Growth Model: TV = (FCF * (1 + g)) / (r - g), where FCF is free cash flow, g is growth rate, and r is discount rate.

• Alternatively, the Exit Multiple Method can be used: TV = Final Year Metric (like EBITDA) * Chosen Multiple (based on industry benchmarks).

• ...read more
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Q5. Why do we use DLOM and DLOC? How do we determine them?
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DLOM and DLOC assess discounts for lack of marketability and control in business valuations.
• DLOM (Discount for Lack of Marketability) reflects the reduced value of an asset that cannot be easily sold.

• Example: A private company share may have a DLOM of 30% compared to a publicly traded company.

• DLOC (Discount for Lack of Control) accounts for the reduced value of an ownership interest that lacks control over business dec...read more
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Q6. When do we use DCF? How do you select comparable companies when using Market Approach?
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Q1. What sort of valuation engagements have you worked on?
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I have worked on various valuation engagements, including business valuations, asset appraisals, and financial modeling.
• Conducted business valuations for mergers and acquisitions, focusing on EBITDA multiples and discounted cash flow analysis.

• Performed asset appraisals for real estate properties, utilizing the income, sales comparison, and cost approaches.

• Engaged in financial modeling for startups to assess their valua...read more
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Q2. Why do we normalize and/or adjust EBITDA?
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Normalization of EBITDA provides a clearer view of a company's operational performance by removing irregularities.
• Adjust for one-time expenses, like legal fees from a lawsuit, to reflect ongoing operations.

• Remove non-cash items, such as stock-based compensation, to show actual cash earnings.

• Account for changes in accounting policies that may distort financial results.

• Include or exclude certain revenue streams, like gai...read more
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Q3. What is CCF? When do we use CCF over DCF?
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Q4. Why do we use DLOM and DLOC? How do we determine them?
Ans. 
DLOM and DLOC assess discounts for lack of marketability and control in business valuations.
• DLOM (Discount for Lack of Marketability) reflects the reduced value of an asset that cannot be easily sold.

• Example: A privately held company may have a DLOM of 30% compared to a publicly traded counterpart.

• DLOC (Discount for Lack of Control) accounts for the reduced value of minority ownership stakes that lack decision-making p...read more
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Q5. What are the factors you would consider while valuing small businesses?
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Valuing small businesses involves assessing financials, market conditions, and operational factors to determine fair worth.
• Financial Performance: Analyze revenue, profit margins, and cash flow. For example, a business with consistent growth in revenue is more valuable.

• Market Position: Evaluate the business's competitive advantage and market share. A niche market can enhance value.

• Asset Valuation: Consider tangible and ...read more
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Q1. Tell me about yourself?
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Q2. Why Withum and where did you hear about the firm?
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Q3. Why are you planning to switch?
Ans. 
I am seeking new challenges and opportunities for growth that align with my career goals and aspirations.
• Desire for professional growth: I want to expand my skill set and take on more responsibilities.

• Seeking a better cultural fit: I believe the values of your organization align more closely with my own.

• Looking for new challenges: I am eager to tackle different projects that will push me out of my comfort zone.

• Desire f...read more
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Q4. What are your expectations with the role?
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I expect to grow professionally, contribute to team success, and develop skills relevant to the role while delivering high-quality results.
• I aim to enhance my analytical skills by working on complex projects, similar to how I improved my data analysis in a previous internship.

• I expect to collaborate with diverse teams, learning from different perspectives, much like my experience in group projects during my studies.

• I l...read more
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Q1. Explain P2P Process in Accounts
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P2P process in accounts refers to the procure-to-pay process, which involves purchasing goods or services and paying for them.
• P2P process starts with the requisition of goods or services needed by a company.

• Once approved, a purchase order is created and sent to the supplier.

• Goods or services are received and an invoice is generated by the supplier.

• The invoice is matched with the purchase order and goods receipt, and th...read more
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Q2. Deferred Revene and Expenditure
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Q3. Entries for Sales and Receivables
Ans. 
Entries for Sales and Receivables involve recording sales transactions and tracking amounts owed by customers.
• Record sales revenue when goods or services are delivered to customers

• Track accounts receivable to monitor amounts owed by customers

• Reconcile sales and receivables to ensure accuracy of financial records
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Q4. Whats is the Payroll Entries you pass at the endof the month
Ans. 
Payroll entries include recording salaries, wages, taxes, and benefits for employees.
• Recording gross wages for employees

• Deducting taxes such as income tax and social security

• Adding employer contributions to benefits like healthcare or retirement plans

• Accruing vacation or sick leave balances

• Adjusting for any bonuses or commissions earned
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Q5. What is the entry for purchase from Vendor before receipt of bill from them
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The entry for purchase from Vendor before receipt of bill is a debit to Inventory and a credit to Accounts Payable.
• Debit Inventory account for the cost of the purchase

• Credit Accounts Payable to show the amount owed to the vendor

• Once the bill is received, adjust the entry accordingly
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Q1. Why Carrer switch
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I am seeking a career switch to align my skills with my passion for management and drive organizational success.
• Desire for growth: I want to expand my skill set and take on new challenges that management roles offer.

• Passion for leadership: I have always enjoyed mentoring and leading teams, which motivates me to pursue a managerial position.

• Transferable skills: My experience in project coordination has equipped me with ...read more
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All basic accounts and finance it was easy.

They give recent topics n select by their resume & GD response.

Q1. Deep into the technical n almost I answered but they rejected
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