Financial reporting and analysis interview questions

  1. Answer :
    Financial modelling is a quantitative analysis commonly used for either asset pricing or general corporate finance.
  2. Answer :
    Start with the net income and go line by line explaining all major adjustments to arrive at cash flow from operating activities. Mention all the necessary parts that are associated with it.
  3. Answer :
    Yes. There are two examples :
    1. A company that is selling off inventory but delaying payables will show positive cash flow for a while even though it is in trouble.
    2. A company has strong revenues for the period but future forecasts show that revenues will decline.
  4. Answer :
    Working capital is the best defined as current assets minus current liabilities.
  5. Answer :
    • The analysis of expenses and revenue which is predicted to be produced or incurred in future is called quarterly forecasting.
    • An expense model tells what expense categories are allowed on a particular type of work order.
  6. Answer :
    The journal is a book where all the financial transactions are recorded for the first time. The ledger is one which has particular accounts taken from the original journal.
  7. Answer :
    The balance sheet summarises the financial position of a company for a specific point in time. The P&L (profit and loss) statement shows revenues and expenses during a set period of time.
  8. Answer :
    Cost accountancy is the application of costing and cost accounting principles, methods and techniques to the science, art and practice of cost control and the ascertainment of profitability as well as the presentation of information for the purpose of managerial decision making.
  9. Answer :
    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows. NPV is used in capital budgeting to analyse the profitability of a projected investment or project.
  10. Answer :
    There are four main financial statements 
    1. balance sheets,
    2. income statements,
    3. cash flow statements,
    4. statements of shareholders’ equity.
  11. Answer :
    Adjustment entries are accounting journal entries that convert a company’s accounting records to the accrual basis of accounting.
  12. Answer :
    You need to be very careful in answering this question. As a financial analyst, following the stock market proves to be beneficial. Also, always be up-to-date with the stocks.
  13. Answer :
    Also known as the weighted average cost of capital (WACC), a composite cost of capital is a company’s cost to borrow money given the proportional amounts of each type of debt and equity a company has taken on.
    WACC= Wd (cost of debt) + Ws (cost of stock/RE) + Wp (cost of pf. Stock)
  14. Answer :
    The capital structure is how a firm finances its overall operations and growth by using different sources of funds.
  15. Answer :
    Goodwill is an asset that captures excess of the purchase price over fair market value of an acquired business.

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