Financial Statement Interview Questions

Water Cooler Careers
#1

I’m teaching an undergrad Financial Statement Analysis course, and I like to put in as many real-life tidbits as I can. So, tell me some good interview questions you’ve seen (or, if you’re in a hiring capacity, you’ve asked) on financial statements, ratio analysis, etc…

They can be for ER, IB, Credit Analysis, etc…

#2
  1. ​​​​​On December 31. XYZ company purchases an asset worth $100 that will be depreciated on a straight line basis over the next 10 years. How will this affect the financial statements on December 31? How will it affect the financial statements 1 year from purchase date?
  2. What is the purpose of adjusting for operating leases? - This may not be relevant anymore, as companies have to reclassify operating leases as financing leases irc…
  3. If you had the choice of only looking at only one of the financial statements, which would you choose? There isn’t really a wrong answer to this one depending the type of analysis being conducted and how many years worth of the one particular statement you’re allowed to have.
#3

I have often seen actual comparison questions where the interviewee is given 2 financial statements and asked to tell which one appears to be the stronger company to lend money to or invest in.

A few other questions:

  1. If you had $10,000 and you could only invest in one project, which of these 3 would you invest in? Then you’re given a sheet with project details like revenue and expenses and asked to name one based on calculations, mostly ratios.
  2. How would you explain to your friend, who has a chemistry background (or any other background except business), what an income statement/balance sheet/cash ratio/etc (basically the interviewer chooses one item that is used a lot in the role) is? There really isn’t a right answer to this because the interviewer is looking to see how well you understand certain things.
#4

Out of college, I collected the questions I got in equity research interviews.

Today there was an increase in China reserve amount, how does it affect money flow? (current event question)

Why would you use EBITDA in valuing companies?

What are the three areas of the Cash flow statement?

How does depreciation affect the financial sheets?

How does Capital Ex affect the three financial statements?

How does declaring a dividend affect the three financial statements?

How does buying back stock affect the three financial statements?

How did you evaluate a recent stock recommendation? What is free cash flow? What is one formula to calculate it?

What does EBITDA stand for?

What is the 10 year treasury rate?

What is book value? What is it important for? What kind of companies would it be useful for, which companies would it not be useful for?

What is the market trading at?

What is the impact of the income statement if a company issues equity to pay down debt?

What are the pros and cons of a DCF?

Where is the market heading?

If you were to rank writing, presenting, and modeling, what would be the order and why?

What level of inflation does the Fed try to maintain?

What is an expected level of GDP growth?

Is the market efficient? Explain your answer.

What accounting classes have you had?

What is the last finance book you read?

I also have 4 or 5 PDFs of technical interview questions from various business schools and employers. Send me your email if you want to look at those, since they may be helpful

#5

I interviewed a bunch of interns this year for credit analysis. Basic questions on financials were:

  1. Run me through an income statement top to bottom
  2. What is EBITDA
  3. What is difference in depreciation and amortisation?

Looking at the above… i probably went a bit to easy on them.

#6

Ah you still asked some pretty tough questions of interns (I’m guessing by interns you mean co-op students like those who are studying but do one term of work). When I was a co-op student, one of my interviews with an accounting company was literally “enter this data in Excel”. I just looked at him like he was mad. It was the easiest interview ever. Got selected for it, but I took a different role instead.