Finance is the distribution of assets, liabilities, and cash throughout time, process, and mediums to maximize investment return. In other words, it is managing or multiplying funds to maximize returns while addressing risks and uncertainties. Personal finance, corporate finance, and public finance are the three primary areas of finance.
There are opportunities to work in finance all across the world. Aspirants often worry about the job interview questions in finance they must prepare but do not know how to go about it.
People with finance skills are required by any corporate or business entity to manage its financial affairs efficiently. A financial specialist is frequently in charge of investments, accounts, and financial papers. It is critical for anybody contemplating a career in finance to understand his/her possibilities in order to determine whether the financial industry is suited for him/her.
This article is a compilation of finance-related interview questions for freshers, intermediate, and senior-level aspirants. We will discuss the basic finance questions and answers that you might be asked and that will help you prepare well for your interview.
Before delving deeper into the questions and answers that you may be asked, take a look at the various divisions of finance you can consider!
There are several financial career paths you may choose and a number of professions and specialties to suit a wide range of abilities and interests.
Insurance
A job in insurance may help organizations and people foresee future risks and avoid financial losses. Sales representatives, claims adjusters, agents, customer service representatives, and risk consultants are all examples of insurance employment. Many insurance positions are with huge corporations, although they may also be found in smaller enterprises.
Hedge Funds
Hedge fund roles usually oversee the purchasing and selling of assets and financial products for private investment firms. Hedge funds are frequently smaller companies where employees may have greater autonomy over their job.
Investment Banking
An investment banker often serves as a financial counselor to customers in order to assist them to increase their earnings. Positions in investment banking include sales and trading, research analysts, and mergers and acquisitions.
Investment bankers frequently give financial advice, manage assets, trade stocks and bonds, and finance transactions. They may provide these services to individuals, businesses, non-profit organizations, or government agencies.
Commercial Banking
Working in commercial banking entails assisting clients with their financial requirements at a bank. Bank tellers, loan officers, mortgage bankers, bank examiners, and branch managers are all commercial banking jobs. Commercial bankers may provide financial services such as managing, checking and savings accounts, retirement accounts, and loans.
Here are the most asked finance questions for interviews:
These basic finance questions and answers have been divided as per the level of difficulty.
1. Please tell me about yourself
This is one question you will be asked in every interview you face.
In an interview, asking about oneself is a good technique to start off and make you feel more at ease. It also allows the interviewer to judge whether you are a good match for the position.
Consider what you want to say about yourself to potential employers before going on an interview. An excellent technique to prepare an answer is to prepare a brief summary of your past.
Finance interview questions and answers for freshers:
2. What exactly is Working Capital?
Any list of finance-related interview questions for freshers must have this question!
Working capital is the amount remaining after subtracting current obligations from current assets. It informs you how much cash is locked up in the firm through inventories and accounts receivable, as well as how much cash is required to pay off the company's short-term commitments (in the coming 12 months).
3. Why do you believe financial management is important for a business?
The interviewer will determine if you are pursuing finance management as a career for the sake of earning money or because you share the same perspective on the key aims and principles of financial management.
You can answer along the lines of:
Financial management is essential for each organization, regardless of size, because it helps the firm function smoothly. A sufficient supply of cash, controlling shareholders' ROIs, developing financial policies, submitting tax returns, meeting legal requirements, and assuring financial control all contribute to a company's ability to meet organizational and legal obligations.
4. What do you understand about the term earnings per share (EPS) and how is it calculated?
EPS is the company's earnings per share. This is determined by the company's common investors. It is the company's earnings per share, as the name implies. It serves as a profitability indicator.
EPS = (Net Income – Preferred Dividends) / weighted average number of shares outstanding over the course of the year
5. Why do capital expenditures build assets while other cash outflows create expenses?
Capital expenditures are capitalized because they provide long-term advantages to the company. For example, a new branch would generate a lot of money for the company for a long time, while an employee's labor will only help the company until the time comes to pay the salaries, which is why they incur a cost. This is the main distinction between an asset and a cost.
6. How would you define the term "goodwill"?
Goodwill is defined as the difference between the cost price and the essential market value. Fundamentally, goodwill is classified as an intangible asset.
7. What exactly do you mean by hedging?
Hedging is a risk management approach that we use to offset investment losses. We accomplish this by taking an opposing position in a linked asset.
However, reducing the amount of risk by hedging leads to a corresponding reduction in potential profit. Hedging is comparable to having insurance in that you pay a set premium and receive guaranteed recompense.
If the asset in issue creates a loss, the opposing position in the connected asset will compensate for this loss. This is why a hedger differs from a speculator in that a hedger focuses on limiting risks rather than increasing earnings.
Financial analyst questions and answers for intermediate level roles
8. What is the difference between a stock split and a stock dividend?
A stock split occurs when a firm divides its equity into two or more parts, for instance, a 2 for 1 split. A firm may split its shares for a variety of reasons.
One of the reasons is to make the stock available to investors who want to invest in the stock of low-cost enterprises. The likelihood of growth for such stocks rises as well. A stock dividend is when a corporation distributes extra shares as dividends rather than cash.
9. What is the clean and dirty bond price?
A clean price is the price of a coupon bond that does not include interest. In other terms, the clean price is the present value of a bond's discounted future cash flows and fewer interest payments.
In the computation of a bond's dirty price, the accumulated interest is included. The dirty bond price is the present value of a bond's discounted future cash flows, which include interest payments made by the issuing firm.
10. How would you handle a mistake made by a subordinate during a critical period of a project?
I usually arrange my initiatives so that there is ample room for such obstacles. If a subordinate makes a serious error, I will do my best to teach him/her what he/she did wrong, how he/she may prevent it next time, and engage him/her in a brief practice exercise before allowing him/her to work on the same subject again.
11. What specifically do you mean by "fair value"?
The term "fair value" refers to an impartial and realistic evaluation of an asset's, good's, or service's possible market price. The fair value of an asset is the price at which it may be bought or sold in a current transaction between interested parties that is not a liquidation. Similarly, the fair value of liabilities is the amount that can be incurred or settled in a current transaction between two willing parties that is not a liquidation.
12. What is the Rights Problem?
A rights offering is an issue that is exclusively available to the company's current shareholders at a fixed price. When a corporation wants to raise funds, it will make this offer.
Rights issues may be seen negatively since the firm may be unable to meet its future commitments with the cash generated by its current operations. One must delve deeper to understand why the firm needs to obtain funds.
Financial analyst questions and answers for advanced level roles
13. What exactly do you mean by "Put Option"?
A put option is a financial market derivative product that permits the holder to sell an asset to the writer of the put at a certain price by a specific date. The purchase of a put option communicates a negative statement about the stock's future.
14. What is the distinction between earnings per share and diluted normalized earnings per share?
Earnings per share (EPS) and diluted earnings per share (EPS) are used to calculate a company's profitability. However, EPS only covers common stock, whereas diluted EPS includes convertible securities such as convertible bonds and preferred stock.
15. What exactly do you mean by interest rate swap?
Companies can use interest rate swaps to exchange their interest rate payments. When one firm prefers a variable interest rate and another prefers a fixed-rate payment, they are quite useful. In an interest rate swap, the length and conditions of the exchange are the most important aspects.
16. Is it viable for a company to have a positive cash flow while still having significant financial difficulties?
These types of finance manager interview questions and answers could be answered in the following ways:
Yes. Even if a firm is in crisis, a corporation that is selling off goods but postponing payables will have a positive cash flow for a time.
A company's revenues were excellent during the era, but future projections predict that revenues will fall.
When you characterize such scenarios, it demonstrates that you are not looking at cash flow figures; rather, you are concerned with where the cash is coming from or going to, and you note all the points emphasizing how the organization is generating or losing money.
We hope the above will prove to be beneficial for you to prepare for your interview.
While it might be difficult to prepare all of these financial analyst questions and answers, by enrolling in a Certificate Program in Finance, you may expedite the learning process and receive individualized attention. HeroVired's various courses on finance may help you achieve what you want as an aspirant in the field of finance.
The best approach to prepare is to read financial news on a regular basis or watch daily market coverage on television. An interviewer may inquire about your financial news habits and request that you describe a recent news article that piques your attention.
Remember to plan ahead of time, stay current on financial news, and understand the fundamentals of money. Show off your analytical abilities - a quick response is unlikely to suffice. Enrolling in a program such as the Certificate Program in Financial Analysis, Valuation & Risk Management can definitely help you learn the skills you will need.
Allow the interviewer time to examine your responses and watch how you think. Highlighting your analytical talents and capacity to think things through will help you stand out in an interview, increasing your chances of landing the job.
Hero Vired’s several courses on finance will help you plan ahead of time and they come with the best features. A program such as the Online Course in Finance & Financial Technologies is also a great choice.
The programs at Hero Vired are designed to help you establish your expertise as a finance professional and become the one who can forecast future trends.
In collaboration with edX and Columbia University, Hero Vired provides India's only pure finance-focused curriculum and will provide a solid foundation in the basic areas of financial analysis. With the courses being online, you can always take them up even if you are a working professional.
