50+ Equity Research Analyst Interview Questions and Answers

Answers to various questions related to finance and accounting.

• Financial statements include balance sheet, income statement, and cash flow statement.

• Shares represent ownership in a company, while debentures are a form of debt.

• Cash flow statement helps in analyzing the cash inflows and outflows of a company.

• Non-performing assets are loans or advances that are not generating income for the bank.

• Derivatives are financial instruments whose value is derived from an underlying asse...read more

Researching a company involves analyzing its financial statements, industry trends, competitive landscape, and management team.

• Start by analyzing the company's financial statements, including income statement, balance sheet, and cash flow statement.

• Evaluate the company's industry position, market share, and growth prospects.

• Assess the competitive landscape by analyzing competitors' financials, market share, and strategies.

• Examine the company's management team, their track rec...read more

Debt/equity ratio is a financial metric that measures a company's leverage by comparing its total liabilities to shareholders' equity.

• Debt/equity ratio = Total liabilities / Shareholders' equity

• It indicates how much debt a company is using to finance its operations

• Higher ratio means higher financial risk and lower creditworthiness

• Lower ratio means lower financial risk and higher creditworthiness

• Industry standards and company's historical data should be considered while analyz...read more

Revenue drivers are factors that contribute to a company's ability to generate income.

• Sales volume

• Pricing strategy

• Market share

• Product mix

• Geographic expansion

• Cost control

• Marketing and advertising

• Mergers and acquisitions

Share market fundamental analysis is a method of evaluating the intrinsic value of a stock by analyzing its financial and economic factors.

• It involves analyzing financial statements, industry trends, macroeconomic factors, and management quality.

• The goal is to determine the true value of a stock and whether it is overvalued or undervalued.

• It helps investors make informed decisions about buying, selling, or holding stocks.

• Examples of fundamental analysis tools include P/E rati...read more

Market trends are influenced by various factors such as economic indicators, geopolitical events, investor sentiment, and industry-specific developments.

• Economic indicators like GDP growth, inflation rates, and interest rates play a significant role in shaping market trends.

• Geopolitical events such as trade wars, political instability, and global conflicts can impact market sentiment and volatility.

• Investor sentiment, including risk appetite, market psychology, and sentiment ...read more

P/E ratio is a valuation ratio that compares a company's current share price to its earnings per share (EPS).

• P/E ratio = Market Price per Share / Earnings per Share

• It is used to determine the relative value of a company's shares in an industry

• Different types of P/E ratio include Forward P/E, Trailing P/E, Shiller P/E

• Forward P/E uses estimated future earnings, Trailing P/E uses past earnings, Shiller P/E uses inflation-adjusted earnings over 10 years

I have prepared a working model of a publicly listed company.

• I analyzed the company's financial statements and market trends.

• I created a detailed financial model using Excel.

• I conducted sensitivity analysis to test the model's assumptions.

• I used valuation techniques such as DCF and comparables analysis.

• I presented my findings and recommendations to the team.

• Example: I prepared a working model of Apple Inc. using its financial statements and market data.

• Example: I used a 5-yea...read more

The 5 financial statements are income statement, balance sheet, cash flow statement, shareholders' equity statement, and currency translation and exchange.

• Income statement shows a company's revenues and expenses over a 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 cash is generated and used by a company.

• Shareholders' equity statement shows the changes in equity of shareholders over ...read more

Repo rate is the rate at which the central bank lends money to commercial banks.

• Repo rate is an important tool used by central banks to control inflation and liquidity in the economy.

• A higher repo rate means that commercial banks will have to pay more interest to borrow money from the central bank, which can lead to higher interest rates for consumers and businesses.

• The current repo rate in India is 4.00% as of August 2021.

Common ratios in accounting include debt-to-equity, current ratio, gross margin, and operating margin.

• Debt-to-equity ratio measures a company's leverage and financial risk.

• Current ratio measures a company's ability to pay its short-term liabilities with its short-term assets.

• Gross margin measures a company's profitability after accounting for the cost of goods sold.

• Operating margin measures a company's profitability after accounting for all operating expenses.

• Cash flow statem...read more

Asset allocation refers to the process of dividing an investment portfolio among different asset categories such as stocks, bonds, and cash.

• Asset allocation is important for diversification and risk management.

• It involves determining the investor's goals, risk tolerance, and time horizon.

• The allocation can be adjusted over time as the investor's circumstances change.

• For example, a young investor with a long time horizon may have a higher allocation to stocks, while an older i...read more

DCF valuation models are used to estimate the intrinsic value of a company based on its future cash flows.

• DCF stands for Discounted Cash Flow

• It involves projecting future cash flows and discounting them back to their present value

• The discount rate used is typically the company's cost of capital

• The resulting present value is the estimated intrinsic value of the company

• DCF models are commonly used in equity research to determine whether a stock is undervalued or overvalued

Interest rates are the cost of borrowing money, while discount rates are used to determine the present value of future cash flows.

• Interest rates are typically set by central banks and influence borrowing costs for individuals and businesses.

• Discount rates are used in financial valuation to calculate the present value of future cash flows, taking into account the time value of money.

• Interest rates can fluctuate based on economic conditions and monetary policy, while discount r...read more

P/E ratio compares stock price to earnings, while dividend is a portion of company's profits distributed to shareholders.

• P/E ratio is a valuation metric calculated by dividing stock price by earnings per share.

• Dividend is a portion of company's profits distributed to shareholders as cash payments.

• P/E ratio helps investors assess the stock's valuation, while dividends provide income to shareholders.

• Companies with high P/E ratios may not pay dividends, as they reinvest profits ...read more

The US market is currently experiencing volatility due to factors such as trade tensions, interest rates, and economic indicators.

• Trade tensions between US and China have led to uncertainty in the market

• Interest rates set by the Federal Reserve impact borrowing costs and investment decisions

• Economic indicators such as GDP growth, unemployment rate, and consumer spending provide insights into the overall health of the economy

Physical shares are paper certificates representing ownership of shares in a company, while demat shares are electronic form of holding shares.

• Physical shares are paper certificates issued by companies to shareholders as proof of ownership.

• Demat shares are electronic form of holding shares where securities are held in a dematerialized account.

• Physical shares require physical handling and storage, while demat shares are held electronically in a demat account.

• Demat shares offer...read more

Key ratios to consider when investing in a stock include P/E ratio, P/B ratio, ROE, and debt-to-equity ratio.

• Price-to-Earnings (P/E) ratio: Indicates how much investors are willing to pay for each dollar of earnings.

• Price-to-Book (P/B) ratio: Compares the market value of a company to its book value.

• Return on Equity (ROE): Measures a company's profitability by showing how much profit it generates with shareholders' equity.

• Debt-to-Equity ratio: Shows the proportion of debt a co...read more

I would rate my knowledge in the stock market as intermediate.

• I have a solid understanding of fundamental analysis and financial statements

• I actively follow market trends and news to make informed investment decisions

• I have experience in conducting company valuations and industry research

Financial modeling is the process of creating a mathematical representation of a company's financial situation.

• Financial modeling involves using historical data and assumptions to forecast future financial performance.

• It helps in analyzing the impact of various factors on a company's financials.

• Financial models are used for budgeting, forecasting, valuation, and decision-making.

• Enterprise value is a measure of a company's total value, including both debt and equity.

• Valuation ...read more

It is not possible to accurately predict the best stock for the next 15 days due to the unpredictable nature of the stock market.

• Stock market is highly volatile and influenced by various factors such as economic indicators, geopolitical events, and market sentiment.

• Short-term stock predictions are often unreliable and can be affected by unexpected events.

• It is recommended to focus on long-term investment strategies rather than short-term speculation.

Value stocks are undervalued by the market, while growth stocks have high potential for future earnings growth.

• Value stocks are typically characterized by low price-to-earnings (P/E) ratios and high dividend yields.

• Growth stocks are companies that are expected to grow at a rate significantly above the average for the market.

• Value stocks are often considered safer investments, while growth stocks are more volatile.

• Examples of value stocks include utility companies and establis...read more

Interest rate hikes by the FED typically lead to lower share prices due to increased borrowing costs and reduced consumer spending.

• Interest rate hikes increase borrowing costs for companies, leading to lower profits and reduced investment in growth opportunities.

• Higher interest rates also make bonds more attractive compared to stocks, leading investors to shift their investments away from equities.

• Consumer spending may decrease as borrowing costs rise, impacting companies' re...read more

Journal entry for acquisition of business under IND AS

• Identify the fair value of assets and liabilities acquired

• Allocate the purchase price to the identifiable assets and liabilities

• Recognize goodwill as the excess of purchase price over the fair value of net assets acquired

• Record the acquisition costs separately as expenses

• Disclose the details of the acquisition in the financial statements

Yes, unlisted shares refer to shares of a company that are not traded on a stock exchange.

• Unlisted shares are not available for trading on a public stock exchange.

• Investors can buy and sell unlisted shares through private transactions.

• The value of unlisted shares is determined based on the company's financial performance and potential growth.

• Examples of companies with unlisted shares include startups, family-owned businesses, and privately held companies.

To convert physical shares to demat, one must open a demat account with a depository participant and submit the physical share certificates for dematerialization.

• Open a demat account with a depository participant (DP)

• Fill out a dematerialization request form provided by the DP

• Submit the physical share certificates along with the form

• The DP will verify the documents and initiate the dematerialization process

• Once the shares are dematerialized, they will reflect in the demat acc...read more

3A Financial is a financial services company specializing in investment research and analysis.

• 3A Financial provides equity research services to institutional investors and individual clients.

• The company offers in-depth analysis of various industries and companies to help clients make informed investment decisions.

• 3A Financial may also provide recommendations on specific stocks or investment opportunities.

• The firm's analysts may publish research reports on a regular basis to k...read more

PE ratio helps investors understand how much they are paying for a company's earnings.

• PE ratio is calculated by dividing the current stock price by the earnings per share (EPS).

• A high PE ratio may indicate that a stock is overvalued, while a low PE ratio may suggest it is undervalued.

• Investors use PE ratio to compare the valuation of different companies within the same industry.

• PE ratio can also be used to assess the growth potential of a company.

• For example, a company with a...read more

PE ratio compares stock price to earnings per share, while PB ratio compares stock price to book value per share.

• PE ratio is calculated as stock price divided by earnings per share, indicating how much investors are willing to pay for each dollar of earnings.

• PB ratio is calculated as stock price divided by book value per share, indicating how much investors are willing to pay for each dollar of assets.

• PE ratio is more commonly used to evaluate growth stocks, while PB ratio is...read more

AS14 is a standard for accounting of employee stock options.

• AS14 is issued by the Institute of Chartered Accountants of India (ICAI).

• It provides guidelines for accounting and disclosure of employee stock options.

• AS14 requires companies to recognize the fair value of employee stock options as an expense in their financial statements.

• It also requires companies to disclose the impact of employee stock options on their financial statements.

• AS14 is important for investors as it he...read more

Unlisted shares are shares of a company that are not traded on a stock exchange.

• Unlisted shares are not available for trading on a public stock exchange.

• Investors can buy and sell unlisted shares through private transactions.

• The value of unlisted shares is determined based on the company's performance and potential.

• Companies may choose to remain unlisted for various reasons, such as avoiding regulatory requirements or maintaining privacy.

• Examples of unlisted shares include sh...read more

Public companies are listed on stock exchanges and have shares available for public trading, while private companies are not listed and have limited shareholders.

• Public companies have shares that are traded on stock exchanges, allowing for public ownership and trading.

• Private companies are not listed on stock exchanges and have limited shareholders, often including founders, employees, and private investors.

• Public companies are required to disclose financial information to th...read more

Depreciation is for tangible assets like buildings and machinery, while amortization is for intangible assets like patents and copyrights.

• 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.

• Depreciation is typically used for assets like buildings, machinery, and vehicles.

• Amortization is typically used for assets like patents, copyrights, and trademarks.

Regularly reading market requires keeping up with news, analyzing trends, and monitoring financial reports.

• Stay up-to-date with financial news and reports

• Analyze market trends and patterns

• Monitor stock prices and company performance

• Use technical analysis tools to identify potential opportunities

• Stay informed about economic indicators and global events that may impact the market

• Follow industry experts and analysts for insights and recommendations

Types of ratios include profitability, liquidity, solvency, and efficiency ratios with formulas to analyze financial performance.

• Profitability ratios measure a company's ability to generate profit, such as Return on Equity (ROE) = Net Income / Shareholder's Equity.

• Liquidity ratios assess a company's ability to meet short-term obligations, like Current Ratio = Current Assets / Current Liabilities.

• Solvency ratios evaluate a company's long-term financial health, for example Debt...read more

Beta is a measure of a stock's volatility in relation to the market.

• Beta measures the sensitivity of a stock's returns to changes in the market.

• A beta of 1 indicates that the stock's price will move with the market.

• A beta greater than 1 indicates the stock is more volatile than the market.

• A beta less than 1 indicates the stock is less volatile than the market.

• Beta is used in the Capital Asset Pricing Model (CAPM) to calculate expected returns.

I want to join BSE to gain exposure to the financial markets and contribute to the growth of the organization.

• Opportunity to work in a prestigious financial institution

• Desire to analyze market trends and make informed investment decisions

• Passion for contributing to the growth of the organization

• Interest in gaining exposure to the financial markets

Equity includes common stock and preferred stock, while debentures are unsecured debt instruments.

• Equity includes common stock and preferred stock

• Common stock represents ownership in a company and typically comes with voting rights

• Preferred stock usually pays a fixed dividend and has priority over common stock in terms of dividends and liquidation

• Debentures are unsecured debt instruments issued by corporations and governments

• Debentures do not have any collateral backing and r...read more

Yes, I invest in markets to gain practical experience and insights for my equity research analysis.

• I invest in a diversified portfolio to manage risk and maximize returns

• I closely monitor market trends, company performance, and economic indicators

• I use fundamental and technical analysis to make informed investment decisions

• Examples: investing in stocks, bonds, ETFs, and mutual funds

I have strong analytical skills, attention to detail, and ability to work under pressure.

• Strong analytical skills

• Attention to detail

• Ability to work under pressure

• Proficient in financial modeling and analysis

• Excellent communication and presentation skills

• Experience in conducting industry research and analysis

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a measure of a company's operating performance.

• EBITDA is calculated by adding back interest, taxes, depreciation, and amortization to net income.

• It is used to analyze and compare profitability between companies and industries.

• EBITDA provides a clearer picture of a company's financial health by excluding non-operating expenses.

• Investors often use EBITDA to assess a company's ability to gen...read more

Inner join combines rows from two tables based on a related column

• Inner join returns only the rows that have matching values in both tables

• It is used to retrieve data that exists in both tables

• Example: SELECT Orders.OrderID, Customers.CustomerName FROM Orders INNER JOIN Customers ON Orders.CustomerID = Customers.CustomerID;

Tangible assets are physical assets that have a quantifiable value and can be seen or touched.

• Tangible assets include property, plant, equipment, inventory, and vehicles.

• These assets are used in the operations of a business and are recorded on the balance sheet.

• Tangible assets can be depreciated over time to reflect their decreasing value.

• Examples of tangible assets include buildings, machinery, and land.

• Tangible assets are different from intangible assets like patents or tra...read more

Options are financial derivatives that give the holder the right, but not the obligation, to buy or sell an underlying asset at a specified price before or on a specified date.

• Call Option: Gives the holder the right to buy the underlying asset at a specified price before the expiration date.

• Put Option: Gives the holder the right to sell the underlying asset at a specified price before the expiration date.

• American Option: Can be exercised at any time before the expiration date...read more

GDP measures the value of goods and services produced within a country, while GNP measures the value produced by a country's residents, regardless of location.

• GDP only includes production within a country's borders, while GNP includes production by a country's citizens regardless of location.

• GDP is used to measure a country's economic output, while GNP is used to measure a country's economic strength.

• For example, if a Japanese company produces goods in the US, the value of th...read more

Equity research provides an opportunity to analyze and evaluate companies, industries, and markets to make informed investment decisions.

• Equity research allows me to delve deep into financial statements, industry trends, and market dynamics to identify investment opportunities.

• I enjoy conducting thorough research and analysis to understand the drivers of a company's performance and its potential for growth.

• Equity research provides the chance to interact with management teams,...read more

Participated in various clubs and events, including volunteering and leadership roles.

• Joined the debate club and participated in intercollegiate competitions

• Volunteered for a local NGO and organized fundraising events

• Served as the treasurer for the college's finance club

• Participated in the college's annual cultural festival and organized a dance performance

• Led a team of volunteers for a cleanliness drive in the college campus

• Attended workshops and seminars on entrepreneurship...read more