Top 20 Interview Questions & Answers for Finance Students

When preparing for a finance interview, you should expect various questions covering different aspects of finance. Here are some key areas to focus on:

Qualifications and Experience

Be prepared to discuss your educational background, relevant certifications, and any previous experience in finance or related fields. Highlight specific projects or accomplishments that showcase your expertise.

Financial Knowledge

Expect questions that test your understanding of financial concepts. Be prepared to explain these concepts and provide examples.

Problem-Solving Skills

You may encounter quantitative and analytical questions that require you to solve complex mathematical problems or evaluate financial scenarios. Practise your problem-solving skills and demonstrate logical thinking and attention to detail.

Industry Awareness

Stay updated on current trends, news, and regulations in the finance industry. Be prepared to discuss how these developments may impact financial markets, investment decisions, or risk management strategies.

Behavioural Questions

Interviewers may ask about your strengths, weaknesses, teamwork abilities, leadership skills, and how you handle challenging situations. Prepare examples that demonstrate your competencies and provide insights into your professional demeanour.

Case Studies or Scenarios

Some interviews may include case studies or hypothetical scenarios that require you to analyse financial data, make recommendations, or assess potential risks. Practice analysing and interpreting financial information to respond to these questions effectively.

Q1. Define Working Capital

Current Assets less Current Liabilities is essentially Working Capital. The amount of capital entailed in a company’s operations, such as account receivables, payables, inventory on hand, and many other items, is described by working capital.

Q2. What are the types of EPS calculation the analysts use?

Analysts use three types of EPS calculations: Basic EPS, Dilutive EPS, and Anti-Dilutive EPS.

Q3. What is the difference between future contracts and forward contracts?

Futures contracts are standardised contracts traded on exchanges with predetermined lot sizes. Forward contracts are customisable over-the-counter contracts, allowing for any desired contract size.

Q4. What causes a deferred tax liability to exist and why?

A Deferred Tax Liability is created when a company reports a tax expense in its financial statements expected to be paid to tax authorities in the future.

Q5. What is the basic concept of the rights issue?

A rights issue is exclusively offered to a company’s existing shareholders at a predetermined price. It is a way for the company to raise additional capital.

Q6. What is the distinction between the clean and dirty prices of a bond, and how do they differ in their calculations?

The clean price of a bond represents the present value of the discounted future cash flows of the bond, excluding the interest payments. The dirty price of a bond includes the accrued interest in the calculation.

Q7. Which is more affordable, equity or debt?

Debt is tax-deductible and provides low returns, as compared to equity. Therefore, it is less expensive.

Q8. Why is it crucial to record PP&E in this manner?

Property, Plant, and Equipment (PP&E) is generally accounted for in four sections on the balance sheet. PP&E is a critical capital asset for many organisations.

Q9. When should a business think about issuing debt rather than equity?

A company’s capital structure should continuously be optimised. Issuing debt can be beneficial if it has taxable income and can pay the required interest payments.

Q10. What kind of budgeting method is appropriate for a business?

A reasonable budget, connected to the company’s overall strategic strategy, is achievable and risk-adjusted.

Q11. What exactly does “goodwill” mean? Why is it used?

Goodwill is an intangible asset related to a company being acquired by another. It can be characterised as a redundant cost price valuation against the same fundamental market value.

Q12. What are preference capital and hedging?

Hedging capital is a tool to reduce risks. Preference capital is capital that is given precedence over equity capital for dividend payments and business closure.

Q13. Distinguish between real money and nominal money?

Real money has a fundamental purchasing power far more significant than nominal money.

Q14. What is the purpose of Treasury Bills in the context of the Government of India’s short-term financial needs?

Treasury Bills are a type of money market instrument used to raise funds to meet the immediate expenditure and requirements of the Government of India.

Q15. What does “short-term financing” mean?

Short-term financing is used to meet a corporation’s immediate liquidity requirements, with a repayment period of 12 months.

Q16. Why is the DCF method utilised, and what do we understand by it?

DCF is a technique used to calculate the value of an investment based on anticipated future cash flows.

Q17. What short-term finance options can one advise if the business needs money immediately?

(Answer not directly provided, but it seems to require a strategy for addressing financial emergencies.)

Q18. What is RAROC?

RAROC is a technique for determining a bank’s profitability, considering expected returns and economic capital.

Q19. Define debentures.

A debenture is a certificate of loan agreement issued with the company’s stamp, providing a specified return and principal amount at maturity.

Q20. What are adjustment entries?

Adjustment entries are passed after each accounting period to adjust nominal and other accounts, creating a stable account on the balance sheet.

Research the company

Gain a thorough understanding of the company’s history, mission, values, products/services, and recent news or developments.

Stay updated on industry trends

Stay informed about the latest trends, challenges, and regulations in the finance industry.

Review your resume

Familiarise yourself with the details mentioned in your resume. Be prepared to elaborate on your educational background, work experience, internships, and relevant skills or achievements.

Brush up on financial concepts

Revisit vital financial concepts such as financial statements, ratio analysis, valuation methods, risk management techniques, and investment strategies.

Practise mock interviews

Arrange mock interviews with a mentor, friend, or career advisor. Practice answering common interview questions, refining your responses, and improving your communication skills, body language, and overall confidence.

Remember, preparation is key for cracking any interview. The more you familiarise yourself with the company, industry, and your experiences, the better equipped you will be to showcase your skills and suitability for the role. The Post Graduate Certificate Programme in Banking and Finance offered by IIM Tiruchirappalli is highly valuable for finance aspirants preparing for interviews. Enrolling in it through Jaro Education will enhance your industry knowledge, accelerate innovation in the digital banking and financial sector, and contribute to your professional growth.