Associate Financial Analyst Interview Questions and Answers

Capital budgeting methods include payback period, net present value, internal rate of return, and profitability index.

• Payback period: Measures the time required to recover the initial investment.

• Net present value (NPV): Calculates the present value of cash inflows and outflows to determine profitability.

• Internal rate of return (IRR): Determines the discount rate at which the NPV is zero.

• Profitability index: Compares the present value of cash inflows to the initial investment....read more

Different types of depreciation include straight-line, double declining balance, units of production, and sum of years digits.

• Straight-line depreciation: Allocates an equal amount of depreciation expense each year.

• Double declining balance depreciation: Accelerates depreciation by applying a fixed percentage to the book value of the asset.

• Units of production depreciation: Depreciation is based on the actual usage of the asset.

• Sum of years digits depreciation: Accelerates depre...read more

Cashflow statement shows the inflow and outflow of cash over a period of time.

• Cashflow statement is a financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents.

• It is divided into three sections: operating activities, investing activities, and financing activities.

• Direct method involves listing all cash inflows and outflows from operating activities, while indirect method starts with net income and adjusts for non-cash ite...read more

The basic assumptions of accounting include cashflow, materiality, and IND AS 115.

• Cashflow assumption states that transactions should be recorded when cash is received or paid.

• Materiality assumption states that only significant information should be reported.

• IND AS 115 is a revenue recognition standard that outlines how and when revenue should be recognized.

Goodwill is an intangible asset that represents the excess of the purchase price of a company over the fair value of its identifiable assets and liabilities.

• Goodwill is recorded on the balance sheet when one company acquires another company for a price higher than the fair market value of its net assets.

• It is considered an intangible asset because it cannot be physically touched or seen.

• Goodwill is not amortized but is instead tested for impairment annually.

• If the fair value ...read more