100 Top Finance Job Interview Questions and Answers

Finance Interview Questions with Answers:-

1. What is an Exchange?
Exchange: An exchange is a highly organized market where (especially) tradeable securities, commodities, foreign exchange, futures and options contracts are sold and bought. Exchange brings together brokers and dealers who buy and sell these objects.
Examples of exchanges are the Bombay Stock Exchange, network Stock Exchange (NYSE), Tokyo Stock Exchange (TSE)

2.what is the difference between a Stock and a Bond?
Stock is an equity instrument while Bond is a debt asset. Since equity is riskier associated with Market Risk it can provide more returns while Bond is
relatively safer instrument so it provides predefined interest called “coupon” though Bond is also associated with Counter Party Risk.

3. What is the difference between Sell Orders and Short Sell Orders?
Sell means selling your own securities, short selling means selling securities without owning them normally broker lends securities to user.there are
two kinds of short sell e.g. Covered Short Sell and naked Short Sell, most of the stock exchanges don’t allow naked short sell because it’s normally abused to take stock price downward.

4.What is naked short and what is covered short?
Naked short is when the trader sells one stock which they don’t own at that moment. Covered Short Sell means that trader owns stock which they are shorting.

5. What is the difference between an ECN and an exchange?

  • ECN is an Electronic Communication Network, An electronic system that attempts to eliminate the role of a third party in the execution of orders entered by an exchange market maker or an over the counter market maker, and permits such orders to be entirely or partly executed.
  • An ECN connects major brokerages and individual traders so that they can trade directly between themselves without having to go through a middleman. Sometimes ECNs are also referred to an as dark pool.

The Financial Information exchange (FINANCIAL INFORMATION EXCHANGE (FIX)  protocol is an electronic communications protocol for international real-time exchange of information related to securities transactions and markets. most of the electronic trading is done in FINANCIAL INFORMATION EXCHANGE (FIX), though different exchanges have there own native protocol most of the broker supports FINANCIAL INFORMATION EXCHANGE (FIX)  protocol.

7. What is the limit order?
As per FINANCIAL INFORMATION EXCHANGE (FIX)  protocol A limit order is an order to buy a security at no more than a specific Price (can be bought lower price) or sell at not less than a specific price (can be sold at a higher price). This gives the customer some control over the price at which the trade is executed, but may prevent the order from being executed. a limit orders can be executed at on price or better price.

8. What is a market order?
In FINANCIAL INFORMATION EXCHANGE (FIX) protocol a market order is a buy or sells order to be executed by the broker immediately at current market prices. This could prove very dangerous in terms of price because it doesn’t care at what price its buying or selling securities.

9. What is a stop or stop-loss order?
In FINANCIAL INFORMATION EXCHANGE (FIX)  protocol A stop order ( also stop loss order) is an order to buy ( or sell) a security once the price of the security has reached above ( or fall below) a specified stop price. When the specified stop price is breached, the stop order is entered as a market order ( no limit).

10. Why do capital expenditures increase assets (PP&E), while other cash outflows, like paying salary, taxes, etc., do not create an asset, and instead instantly create an expense on the income statement that reduces equity via retained earnings?

Capital expenditures are capitalized because of the timing of their estimated benefits – the lemonade stand will benefit the firm for many years. The employees’ work, on the other hand, benefits the period in which the wages are generated only and should be expensed then. This is what differentiates an asset from an expense.

11. Walk me through a cash flow statement.
A. Start with net income, go line by line through major adjustments (depreciation, changes in working capital and deferred taxes) to arrive at cash flows from operating activities.

  • Mention capital expenditures, asset sales, purchase of intangible assets, and purchase/sale of investment securities to arrive at cash flow from investing activities.
  • Mention repurchase/issuance of debt and equity and paying out dividends to arrive at cash flow from financing activities.
  • Adding cash flows from operations, cash flows from investments, and cash flows from financing get you to the total change of cash.
  • Beginning-of-period cash balance plus a change in cash allows you to arrive at end-of-period cash balance.

12. What is working capital?
Working capital is defined as current assets minus current liabilities; it tells the financial statement user how much cash is tied up in the business through items such as receivables and inventories and also how much cash is going to be needed to pay off short term obligations in the next 12 months.

13. Is it possible for a company to show positive cash flows but be in grave trouble?
Absolutely. Two examples involve unsustainable improvements in working capital (a company is selling off inventory and delaying payables), and another example involves a lack of revenues going forward.in the pipeline

14. How is it possible for a company to show positive net income but go bankrupt?
Two examples include deterioration of working capital (i.e. increasing accounts receivable, lowering accounts payable), and financial shenanigans.

15. I buy a piece of equipment, walk me through the impact on the 3 financial statements.
Initially, there is no impact (income statement); cash goes down, while PP&E goes up (balance sheet), and the purchase of PP&E is a cash outflow (cash flow statement)

Over the life of the asset: depreciation reduces net income (income statement); PP&E goes down by depreciation, while retained earnings go down (balance sheet); and depreciation is added back (because it is a non-cash expense that reduced net income) in the cash from operations section (cash flow statement).

16. Why are increases in accounts receivable a cash reduction on the cash flow statement?
Since our cash flow statement starts with net income, an increase in accounts receivable is an adjustment to net income to reflect the fact that the company never actually received those funds.

17. How is the income statement linked to the balance sheet?
Net income flows into retained earnings.

18. What is goodwill?
Goodwill is an asset that captures excess of the purchase price over the fair market value of an acquired business. Let’s walk through the following example: Acquirer buys Target for $500m in cash. Target has 1 asset: PPE with a book value of $100, a debt of $50m, and equity of $50m = book value (A-L) of $50m.

  1. Acquirer records cash decline of $500 to finance the acquisition
  2. Acquirer’s PP&E increases by $100m
  3. Acquirer’s debt increases by $50m
  4. Acquirer records goodwill of $450m

19. What is a deferred tax liability and why might one be created?
Deferred tax liability is a tax expense amount reported on a company’s income statement that is not actually paid to the IRS in that time period, but is expected to be paid in the future. It arises because when a company actually pays less in taxes to the IRS than they show as an expense on their income statement in a reporting period.

Differences in depreciation expense between book reporting (GAAP) and IRS reporting can lead to differences in income between the two, which ultimately leads to differences in tax expense reported in the financial statements and taxes payable to the IRS.

20. What is a deferred tax asset and why might one be created?
Deferred tax asset arises when a company actually pays more in taxes to the IRS than they show as an expense on their income statement in a reporting period.

  • Differences in revenue recognition, expense recognition (such as warranty expense), and net operating losses (NOLs) can create deferred tax assets.

FINANCE Questions pdf free download::

1. How do you manage online finance operations and describe a method to prepare a report?
2. When working on a project, describe a time when you provided strategic analysis as required to drive improved decision making. What was the situation? How did you come up with your resolutions?
3. What is the current tax service rate in ……?
4. What experience do you have in the Finance field?
5. What have you done to improve your Finance knowledge in the last year?
6. What have you learned from mistakes on the Finance job?
7. What made you choose to apply to this Finance…position?
8. What are top 3 knowledge/top 3 skills for Finance…position?
9. Can you describe a recent situation in which you accomplished an important objective in a brief period of time?
10. Describe a time when you used your skills to persuade a manager or colleague to accept your recommendations?
11. How do you take challenges?
12. Are you willing to work in shifts?
13. What is the thing you like the most in the world? Why?
14. What is the thing you dislike the most in the world? Why?
15. What does success mean to you?
16. What major factors drive mergers and acquisitions?
17. What is goodwill? How does it affect net income?
18. What is working capital?
19. What are deferred taxes?
20. Tell us about one of the technical problems you had to solve recently.?
21. Do you prefer teamwork or individual work?
22. Explain the private clients and private equity. Which method do you use to calculate company assets invested in external projects?
23. In which conditions would a company prefer debt over equity finance?
24. Explain macroeconomics/capital markets/investment theory?
25. Where do you think interest rates will be 1 year from now?
26. Describe a normal day in the office for us?
27. What do you think about the economy and interest rates?
28. What process do you use to ensure accuracy