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Top 13 Financial Analyst Interview Questions & Answers

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28th Aug, 2023
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Top 13 Financial Analyst Interview Questions & Answers

Preparing for an interview can be nerve-wracking because you’re never sure what might hit you during the actual process. So, it pays to know about the potential questions that you might have to answer. Most interviewers base their selection criteria on KSAO, i.e., your Knowledge, Skill, Ability, and Other characteristics. Financial analyst interview questions unveil whether you are tailor-made for the job profile or not. 

As a candidate, the interviewer will ask you general, behavioural, and technical questions. They ask each question to determine a particular characteristic, even the simplest one. Answering with confidence is the key, given that your answers are factual and logical. We have compiled a few questions and their proper answers to make your life easier, followed by some bonus tips to take your performance to the next level. 

General & Behavioral Questions

1. What made you choose the role of a financial analyst for your career?

The interviewer asks such questions to understand your career plans and inner drive. Tell them about your background and what established your interest in this field. 

Example: Financial analysis requires a curious and detail-oriented person, and I happened to be both of those. In addition to that, I always helped my peers by managing finances, and now I intend to do it on a larger scale. 

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2. What do you consider one of your greatest strengths? 

Knowledge of oneself is the highest form of knowledge, so you can get creative here and describe one of your greatest strengths that could be useful to their company. 

Example: “I believe that critical thinking paired with immediate action is one of my greatest strengths. I learned this as a child when I started playing chess because looking at a position from all angles is vital in chess, and you need to master time control for speed chess. Fortunately, this ability helped me beyond chess and became a valuable asset in my career. 

3. How do you handle a situation where you notice inconsistencies in a company’s finances? 

Such questions help to examine your quick wit and your potential to solve dilemmas. Whenever you answer such questions, keep your answers ethical and influential. 

Example: “In a situation where I notice mishandling or miscalculations, I first cross-check to identify any potential fault. If I find any inconsistencies, I attempt to correct the situation. In case I’m unable to address the problem, I escalate the issue to my supervisors.”

More such questions:

  • Why did you choose to apply to our company instead of others?
  • What is your next step after becoming a financial analyst?
  • Do you believe you have any weaknesses? If yes, have they ever affected your 

Professionalism? 

  • What would you do in your first month of employment? 
  • Do you operate better alone or with a team?
  • Tell us about one of your most successful projects. 

Technical Questions 

1. What factors do you consider when analyzing as a financial analyst? 

Ans: Analysing a few important factors is helpful when handling data because businesses differ in their operations, core values, and objectives.

  • Decisions that can affect the stock price.
  • The factors affecting financial strategies, choices, and decisions can be a product/target audience/customer segment.
  • The effect of financial decisions on key value drivers.
  • Take note of the right opportunities supported by capital and revenue.
  • Streamlining of finance requirements and making a business effective.
  • Impact of business on the current working capital and the risk exposure.

2. What is the difference between ‘cash flow’ and ‘free cash flow’? 

Ans: ‘Cash flow’ helps to determine the net cash inflow that comes from financing, investing, operating, and other business activities. However, ‘free cash flow’ is the remaining amount available after investing and cash operating, which shows the business’s current value. In addition, ‘free cash flow’ includes Net Working Capital and capital expenditures which the investors use to define business valuation. 

3. What are the types of valuation techniques?

Ans: The valuation and calculation of stocks or businesses use mainly three types of valuation techniques. 

  • Precedent transactions: Useful in understanding the transactional value of a business by comparing it with another recently sold company. 
  • Comparable company analysis: Used in comparing the worth of two businesses to find out the current by implementing EBITDA, P/E. 
  • DCF analysis: Helps to foresee future cash flows. 

4. What do you know about ‘cost accountancy’? 

Ans: Cost accountancy is a type of managerial accounting used to derive a company’s total cost of production by using variable costs. These variable costs are taken from every step of the production, along with leased expenses and fixed costs. 

5. What is the crucial difference between a ledger and a journal?

Ans: All the financial transactions are recorded in the Journal for the first time, whereas a ledger is one particular account taken from a journal. We can say that journals play a vital role in creating the ledger. Therefore, the accuracy of the ledger depends upon the Journal. Ensuring the data entered in the Journal is correct, cross-checking the work distribution, and meeting the standards for all accounts are a few ways to avoid faulty ledgers. 

6. What evaluation metric would you use to analyse our company’s stock, and why? 

Ans: Line charts are preferable when you want to keep track of daily movements. Bar charts would help track the highs and lows of stock price, while point charts are helpful to evaluate stock momentum. 

7. Is it possible for a positive cash flow to co-exist with financial trouble in a company?

Ans: Yes, and this can be seen in two scenarios. In the first one, a company has substantial revenues, but the future forecasts indicate a drop in revenue. In the second scenario, if a company keeps delaying their payable and continues to sell off their inventory, it will likely show positive cash flow. 

8. What does a ‘cash flow statement’ look like?

Ans: First, we calculate the total cash from three significant cash flow statements, i.e., financing activities, investing activities, and operating activities. Further, we add the opening cash balance and explain all significant adjustments which will give us our total change in cash. 

9. Why is a cash flow statement important? 

Ans: A cash flow statement is essential because it gives us an estimate of the available free cash flow. It not only provides data about a firm’s liquidity status but also outlines its ability to change cash flows in the future. These pointers become essential in predicting the company’s ability to expand and prosper in the future. 

10. Describe how you would handle a company’s budgeting process. 

Ans. A reasonable budget is realistic yet profitable. It has buy-in from all business sections and allows a margin of error. A budget always relies on the company’s overall strategic planning. If one plans a budget, they must include all the departments and make it a repetitive process. One can also use ‘zero-based, but the technique you use relies more on business. However, a key factor is to create a flexible budgeting calendar that is easy for everyone to follow. 

Bonus Tips To Ace Your Interview

  • Interact: Most people take the backseat in an interview and only answer questions. If you want to show interest in the company, ask a few questions that a potential financial analyst would ask if hired. This will open the lines of communication between you and the potential employer. 
  • Express: Look at the interview as an opportunity to express your ambitions and keep your answers authentic. A candidate that stands out is the one who brings something new to the table, and the only thing never seen before is ‘you’! So do not shy away from bringing out your personality.
  • Research: Do your homework and analysis about the company, read the ‘about,’ ‘vision,’ or “goal’ sections on their websites. Go through their mission statement to know about their fundamental values and use that information during your interview.
  • Practice: Last but not least, practice your tonality and potential answers for basic questions. Besides knowing your subject inside out, you must also learn to be confident, which comes with practice.

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Industry-Specific Financial Analyst Interview Questions

During financial analyst interviews, it has become increasingly common for hiring managers to ask industry-specific questions to gauge a candidate’s suitability for the role within a particular sector. These questions aim to assess the candidate’s understanding of industry dynamics and how they can apply financial analysis techniques to address unique challenges and opportunities within the industry.

For instance, in the banking sector, a financial analyst might be asked about the impact of changing interest rates on loan portfolios and strategies to manage interest rate risk. In the healthcare industry, questions could revolve around analyzing the financial implications of healthcare reforms or the profitability of specific medical procedures.

In the technology industry, a candidate may be presented with questions related to financial forecasting for software development projects or evaluating the return on investment for research and development initiatives. In manufacturing, interviewers may inquire about cost analysis, supply chain optimization, and inventory management strategies.

Industry-specific knowledge and expertise are highly valuable in the role of a financial analyst. A candidate who demonstrates a deep understanding of the challenges and opportunities within a particular sector can provide more accurate financial insights and recommendations. Moreover, their ability to interpret industry-specific data and key performance indicators will enable them to deliver targeted solutions to meet business objectives effectively.

By tailoring interview questions to specific industries, hiring managers can identify candidates who not only possess strong financial analysis skills but also possess a keen awareness of industry trends and regulations. Such candidates are more likely to make informed decisions and contribute significantly to the financial success of the organization within their respective sectors.

Case Study-Based Questions for Financial Analysts

In recent years, case study-based questions have gained popularity as an effective method to assess financial analysts’ abilities to tackle real-world financial scenarios. These questions present candidates with practical business situations, often derived from the company’s past or potential challenges, and require them to apply financial analysis and critical thinking to arrive at well-structured solutions.

Case studies enable interviewers to evaluate a candidate’s problem-solving skills, analytical prowess, and capacity to handle complex financial data. They also offer insights into how candidates approach decision-making and prioritize financial factors when presented with multifaceted situations.

When facing case study questions, financial analyst candidates should begin by carefully reading and understanding the given scenario, identifying key variables, and outlining the relevant financial aspects. Critical thinking is crucial in interpreting data and making logical connections between various financial metrics and business objectives.

To excel in case study-based interviews, candidates should demonstrate their ability to perform financial modelling, conduct sensitivity analysis, and assess risk factors. Additionally, clear and concise communication skills are vital when presenting their findings and proposed solutions to interviewers.

Preparing for case study questions involves practising with various scenarios, exploring different financial models, and honing problem-solving abilities. Candidates can benefit from familiarizing themselves with common financial analysis techniques and tools, such as discounted cash flow (DCF) analysis, scenario analysis, and ratio analysis.

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Overall, case study-based questions challenge financial analyst candidates to showcase their practical skills, critical thinking abilities, and adaptability to real-world scenarios, providing interviewers with valuable insights into their potential contributions to the organization.

Conclusion

Review all the questions once and rehearse a few answers alone to get a picture of what you will be saying in the interview. Set realistic expectations for yourself and understand that a well-prepared candidate knows their subject like the back of their hand. Find subtle ways to plug in any additional skills or knowledge you have that might help the company in any way. Dress well and neat, show up on time, be polite, and most importantly, be yourself!  

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Profile

Pavan Vadapalli

Blog Author
Director of Engineering @ upGrad. Motivated to leverage technology to solve problems. Seasoned leader for startups and fast moving orgs. Working on solving problems of scale and long term technology strategy.

Frequently Asked Questions (FAQs)

1What is the salary of a financial analyst?

In India, a financial analyst can earn more than Rs. 13,00,000. The average starting salary can be anywhere around Rs. 3,02,600. On average, financial analysts can make around Rs.26,070, which is +24% higher than the average salary of Indians.

2Can financial analysts work from home?

Amidst the pandemic, most people are now working from their homes. Although it largely depends on the company’s mandate and requirements, some financial analysts choose to work from home by default.

3Are there different types of financial analysts?

Yes, there are mainly four roles covered by financial analysts.

1. Risk analysts evaluate the risk factor of investment.
2. Rating analysts establish and evaluate the ranks of other companies to know if they are capable of repaying debts.
3. Fund managers make the buy or sell decisions while working alongside mutual funds or hedge funds.
4. Portfolio managers select and evaluate investments.

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