600+ Financial Analyst Interview Questions and Answers

Answering how to show a transaction involving cash and loan in financial statements.

• The cash purchase of an asset will be shown as a decrease in cash on the cash flow statement and as an increase in assets on the balance sheet.

• The purchase made through bank loan will be shown as an increase in liabilities on the balance sheet and as an increase in cash on the cash flow statement.

• The loan taken will be shown as an increase in liabilities on the balance sheet and as an increase...read more

Using the given numbers, estimate the total number of runners in a marathon.

• The numbers given are likely bib numbers assigned to runners.

• Look for patterns or gaps in the numbers to estimate the total number of runners.

• Consider the size of the event and typical number of participants in marathons.

• Assuming no duplicates, the highest number gives a rough upper bound on the total number of runners.

Capital markets are platforms where companies and governments can raise funds through the sale of securities. Money markets are for short-term borrowing and lending.

• Capital markets are divided into primary and secondary markets

• Primary markets are where new securities are issued for the first time

• Secondary markets are where existing securities are traded among investors

• Examples of capital markets include stock exchanges and bond markets

• Money markets are for short-term borrowin...read more

Derivatives are financial contracts whose value is derived from an underlying asset or security.

• Derivatives can be used for hedging or speculation.

• Examples of derivatives include futures, options, and swaps.

• Derivatives can be traded on exchanges or over-the-counter.

• Derivatives can be complex and carry significant risk.

• Derivatives played a role in the 2008 financial crisis.

Revenue recognised at February end would be ₹2000.

• Revenue should be recognised on a monthly basis, so ₹2000 for February

• This is calculated by dividing the annual premium by 12

• This is an example of accrual accounting

Mathematical and logical reasoning questions for Financial Analyst position.

• 5% of 50 is 2.5

• 50% of 5 is 2.5

• To cut a cake in 8 pieces in 3 cuts, first cut the cake in half horizontally, then cut it in half vertically, and finally make two diagonal cuts from the center to the corners.

• For medical field: NO

• Data points: N/A

• Puzzle question: NO

Indian IT sector has a positive outlook with growth drivers like digital transformation and cloud adoption, but faces challenges like talent shortage and increasing competition.

• Growth drivers include digital transformation, cloud adoption, and increasing demand for automation and AI solutions.

• Challenges include talent shortage, increasing competition from global players, and regulatory changes.

• Stock picks include TCS, Infosys, and Wipro, which have strong financials and a tra...read more

The procedure to help a 70+ year old man use a smartphone with social apps.

• Start with basic smartphone features like making calls and sending messages

• Introduce the man to social apps like Facebook or WhatsApp

• Provide step-by-step instructions on how to download and install apps

• Teach him how to create an account and set up a profile

• Guide him on how to find and add friends or family members

• Explain how to navigate through the app's features and settings

• Demonstrate how to post upd...read more

Investment banking involves raising capital for clients through various financial instruments and services. Capital markets are where securities are traded. Trade life cycle involves the steps from trade initiation to settlement.

• Investment banking involves underwriting securities, mergers and acquisitions, and providing financial advisory services to clients.

• Capital markets are where securities such as stocks, bonds, and derivatives are traded.

• Trade life cycle involves trade ...read more

I do not fast regularly, but I am comfortable with the lunch break and designated eating times during work hours.

• I do not fast regularly, but I am open to following the designated break times for eating during work hours.

• I understand the importance of maintaining a schedule and am willing to adhere to the lunch break and designated eating times provided.

• I believe in maintaining a healthy work-life balance and am comfortable with the structure of breaks and meal times during w...read more

If electricity meter is installed in office and we don't receive the bill for March month, the treatment at March end will be...

• Check if the meter reading has been taken for March

• Contact the electricity provider to inquire about the bill

• Estimate the bill based on previous months' usage

• Accrue the estimated bill as an expense in the financial statements

• Adjust the expense in the following month when the actual bill is received

Working capital should be positive and equal to 30 days of sales

• Working capital is the difference between current assets and current liabilities

• In this case, we need to calculate the average number of days of payables and receivables

• Assuming sales are made evenly throughout the year, working capital should be positive and equal to 30 days of sales

• Working capital can be improved by reducing the number of days of payables or increasing the number of days of receivables

Valued Suzlon using DCF and ratios. Assumed growth rates based on industry trends and company performance.

• Used DCF to estimate the intrinsic value of Suzlon based on future cash flows

• Used P/E ratio and EV/EBITDA ratio to compare Suzlon's valuation with industry peers

• Assumed growth rates based on industry trends and Suzlon's historical performance

• Took into account Suzlon's debt levels and interest expenses in the DCF calculation

• Adjusted the discount rate based on Suzlon's risk...read more

There are different types of shares, such as common shares and preferred shares. Depreciation is the decrease in value of an asset over time.

• Common shares represent ownership in a company and give shareholders voting rights.

• Preferred shares have a fixed dividend and priority over common shares in case of liquidation.

• Depreciation is an accounting method used to allocate the cost of an asset over its useful life.

• It reflects the decrease in value of assets like buildings, vehicl...read more

Capital account convertibility refers to the freedom to convert local financial assets into foreign financial assets and vice versa.

• Capital account convertibility allows for unrestricted flow of capital in and out of a country.

• It can lead to increased foreign investment and economic growth.

• However, it can also lead to volatility in the economy and currency fluctuations.

• India has been cautious in implementing full capital account convertibility due to concerns about its impact...read more

Futures and forward contracts differ in terms of standardization and exchange trading. Futures contracts are generally considered riskier due to their higher liquidity and potential for leverage.

• Futures contracts are standardized and traded on exchanges, while forward contracts are customized and traded over-the-counter.

• Futures contracts have higher liquidity and are more easily tradable compared to forward contracts.

• Futures contracts often involve leverage, allowing traders ...read more

Financial Analyst interview questions on stock market, primary and secondary market, derivatives, and reasoning.

• Introduced myself and discussed current stock market conditions

• Explained what market is and the difference between primary and secondary markets

• Discussed derivatives and their types such as futures, options, and swaps

• Answered reasoning questions related to financial analysis and decision-making

• Provided examples to support my answers

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

• Call options give the holder the right to buy the underlying asset at a specified price within a specific time period.

• Put options give the holder the right to sell the underlying asset at a specified price within a specific time period.

• If the price of a stock is going to go down, it would be beneficial to buy a put option.

• A put ...read more

On average, you need to flip 13 cards to get the first ace from a deck of 52 cards with 4 aces.

• The probability of getting an ace in one flip is 4/52 or 1/13.

• The probability of not getting an ace in one flip is 48/52 or 12/13.

• Using the formula for geometric distribution, the expected number of flips to get the first ace is 1/(1/13) = 13.

Accrued income and expenses are recognized but not yet received or paid, while deferred assets and liabilities are recognized but not yet earned or incurred.

• Accrued income and expenses are recognized in the financial statements but not yet received or paid.

• Deferred assets and liabilities are recognized in the financial statements but not yet earned or incurred.

• Journal entries for accrued income and expenses involve debiting the relevant expense or income account and crediting...read more

Debit and credit are accounting terms used to record financial transactions. Inventory is the stock of goods a company has on hand.

• Debit is an entry on the left side of an account, while credit is an entry on the right side of an account.

• Inventory is the stock of goods a company has on hand and is recorded as an asset on the balance sheet.

• A debit note is a document used to inform a vendor of a debit made to their account.

• A credit note is a document used to inform a vendor of ...read more

Depreciation is the decrease in value of tangible assets over time, while amortization is the decrease in value of intangible assets over time. Capital gains are profits made from selling assets at a higher price than their purchase price.

• Depreciation applies to tangible assets like buildings, machinery, and vehicles, while amortization applies to intangible assets like patents, copyrights, and trademarks.

• Depreciation and amortization are both methods of allocating the cost o...read more

OTC market refers to the trading of securities directly between parties, while investment banking involves providing financial services to corporations and governments.

• OTC market stands for Over-the-Counter market, where securities are traded directly between parties without a centralized exchange.

• Investment banking is a sector of the financial industry that provides various financial services such as underwriting, mergers and acquisitions, and advisory services to corporatio...read more

Variance in actual and budgeted expenses can be due to various reasons.

• Inaccurate budgeting

• Unexpected events or emergencies

• Changes in market conditions

• Inefficient cost management

• Errors in recording or reporting expenses

• Delayed or unanticipated expenses

• Inflation or currency fluctuations

• Changes in business strategy or priorities

Accruals are expenses incurred but not yet paid. Journal entries are made to record them. Debtors receivable are amounts owed to the company.

• Accruals are expenses that have been incurred but not yet paid.

• Journal entries are made to record accruals.

• Debtors receivable are amounts owed to the company by customers.

• Accruals and debtors receivable are both recorded on the balance sheet.

• Examples of accruals include salaries, rent, and utilities.

• Examples of debtors receivable include...read more

The entry for purchases will be updated to reflect the increase from Rs.100 to Rs.105.

• The original entry for purchases was Rs.100

• The updated entry for purchases will be Rs.105

• The entry will be updated in the accounting software or ledger

• The accounts affected will be the purchases account and the accounts payable account

The market for roadway and highway sector in India is growing rapidly due to increasing infrastructure development.

• India has one of the largest road networks in the world, with over 5.8 million kilometers of roads.

• The government of India has been investing heavily in the development of road infrastructure, including the construction of new highways and the expansion of existing ones.

• The National Highways Authority of India (NHAI) is responsible for the development, maintenanc...read more

A balance sheet includes assets, liabilities, and equity. A P&L a/c includes revenue, expenses, and net income/loss.

• Balance sheet line items: assets (cash, accounts receivable, inventory, property), liabilities (accounts payable, loans), equity (retained earnings, common stock)

• P&L a/c line items: revenue (sales, interest income), expenses (cost of goods sold, salaries, rent), net income/loss

• Balance sheet and P&L a/c are two important financial statements used to assess a comp...read more

The probability of getting an odd number on a single dice roll is 1/2 or 50%.

• A dice has 6 sides, 3 of which are odd numbers (1, 3, 5).

• Each side has an equal chance of landing face up.

• Therefore, the probability of getting an odd number is 3/6 or 1/2.

Derivatives are financial contracts that derive their value from an underlying asset or security.

• Types of derivatives include futures, options, swaps, and forwards.

• Futures are contracts to buy or sell an asset at a predetermined price and date.

• Options give the holder the right, but not the obligation, to buy or sell an asset at a predetermined price and date.

• Swaps involve exchanging cash flows based on different financial instruments.

• Forwards are contracts to buy or sell an a...read more

Actual revenue can be less than forecasted revenue due to various reasons.

• Decrease in demand for the product or service

• Increased competition

• Changes in market conditions

• Inaccurate forecasting

• Economic downturn

• Poor sales and marketing strategies

• Production issues

• Pricing strategy

• External factors such as natural disasters or pandemics

Ledger is a record of all financial transactions, while a statement is a summary of those transactions.

• Ledger is a detailed record of all financial transactions, including debits and credits.

• Statement is a summary of those transactions, usually presented in a standardized format.

• Ledger is used for day-to-day record keeping, while statements are used for reporting and analysis.

• Examples of ledgers include general ledger, accounts payable ledger, and accounts receivable ledger.

• E...read more

Analysing internet surfing history to plan card type and promotions for customer.

• Analyse the customer's search history for keywords related to shopping, travel, dining, etc.

• Identify the customer's spending patterns and preferences based on their browsing history.

• Offer promotions and discounts on products or services that the customer has shown interest in.

• Suggest a credit card with rewards and benefits that align with the customer's interests and spending habits.

• Consider the ...read more

Capital market is a platform where long-term securities are traded. It is of two types - primary and secondary.

• Capital market is a market for long-term securities like stocks, bonds, and debentures.

• It is of two types - primary market and secondary market.

• Primary market is where new securities are issued for the first time, while secondary market is where existing securities are traded.

• Capital market helps companies raise funds for their long-term investments.

• Examples of capit...read more

Ageing analysis is done by categorizing bills payables by their due dates and calculating the number of days past due.

• Sort bills payables by due date

• Categorize bills payables by age (e.g. 0-30 days past due, 31-60 days past due, etc.)

• Calculate the total amount of bills payables in each age category

• Analyze the trend of bills payables aging over time

• Prepare a report to show the ageing analysis results

A dividend payout by a 50% JV affects the parent company's financial statements through the equity method.

• The parent company will record its share of the JV's dividend income as a decrease in the investment account on the balance sheet.

• The parent company's income statement will reflect its share of the JV's earnings, including the dividend income.

• The parent company's cash flow statement will show an increase in cash from the dividend received.

• The dividend payout may also impa...read more

Budgeting is a plan for future expenses while forecasting is an estimate of future financial outcomes.

• Budgeting involves creating a financial plan for a specific period of time, usually a year, and allocating resources accordingly.

• Forecasting involves estimating future financial outcomes based on past performance and current trends.

• Budgeting is more rigid and inflexible while forecasting is more flexible and adaptable.

• Budgeting is used to control spending while forecasting is...read more

Gross ratio is a financial ratio that measures the proportion of a company's revenue that is used to cover its operating expenses.

• Gross ratio is calculated by dividing the cost of goods sold by the total revenue.

• It helps in determining the efficiency of a company's operations.

• A higher gross ratio indicates that a company is able to generate more revenue from its operations.

• Debenture is a type of long-term debt instrument issued by companies to raise funds.

• It is a form of a lo...read more

Delta is the measure of an option's price sensitivity to changes in the price of the underlying asset.

• Delta is a Greek letter used to represent the degree of change in an option's price relative to the change in the price of the underlying asset.

• Delta ranges from 0 to 1 for call options and -1 to 0 for put options.

• A delta of 0.5 means that for every $1 increase in the underlying asset's price, the option's price will increase by $0.50.

• For a future on 1000 stocks, the delta wo...read more

There are typically 2-3 checks required to open a company's bank account.

• The bank will check the company's legal status and registration documents.

• The bank may also check the credit history of the company and its owners.

• Depending on the bank's policies, additional checks may be required, such as a background check on the company's directors.

• Examples of required documents include articles of incorporation, business license, and tax ID number.

Unposted vendor invoices can cause inaccurate financial statements and misrepresentation of financial performance.

• Unposted vendor invoices can lead to incorrect accounts payable balances.

• If the invoice is not posted in the correct period, it can lead to misrepresentation of financial performance for that period.

• Delayed posting of vendor invoices can also lead to late payment fees and damage vendor relationships.

• It is important to have a system in place to ensure timely receip...read more

Finance is the study of how individuals, businesses, and organizations manage money and investments.

• Finance involves analyzing financial statements, managing investments, and making financial decisions.

• Examples include budgeting, forecasting, risk management, and financial planning.

• Finance also includes understanding financial markets, such as stocks, bonds, and commodities.

• Financial analysts use financial data to make recommendations and inform investment decisions.

• Finance i...read more

Capital market is a platform where companies and governments can raise funds through the sale of securities. Investment banking involves providing financial services to clients. Mutual funds are investment vehicles that pool money from multiple investors to invest in various securities. SEBI is the regulatory body that oversees the securities market in India. Money market is a platform where short-term financial instruments are traded.

• Capital market is a platform for raising ...read more

Depreciation is the decrease in value of tangible assets over time, while amortization is the decrease in value of intangible assets over time. Derivatives are financial instruments that derive their value from an underlying asset.

• Depreciation applies to tangible assets like buildings, machinery, and vehicles, while amortization applies to intangible assets like patents, copyrights, and trademarks.

• Depreciation and amortization are both methods of allocating the cost of an ass...read more

Finance management involves the planning, organizing, directing, and controlling of financial activities within an organization.

• It includes budgeting, financial analysis, forecasting, and financial reporting.

• Finance management aims to maximize the value of the organization by making informed financial decisions.

• It involves managing cash flow, investments, and risk.

• Financial analysts play a crucial role in finance management by analyzing financial data and providing insights f...read more

Vendor's invoice may not get posted in correct period due to various reasons.

• Incorrect date entered on the invoice

• Delay in receiving the invoice from the vendor

• System error or glitch

• Incorrect posting date selected during posting

• Invoice not approved by the authorized personnel

• Vendor's account not set up correctly in the system

• Mismatch in the purchase order and invoice details

A cash flow statement typically has three sections: operating activities, investing activities, and financing activities.

• The first section shows cash flows from operating activities, such as sales revenue and expenses.

• The second section shows cash flows from investing activities, such as buying or selling assets.

• The third section shows cash flows from financing activities, such as issuing or repaying debt or equity.

• The net change in cash for the period is calculated by adding...read more