Finance Interview Questions and Answers (44 Samples)

Common finance technical, behavioral, and logical questions with sample answers

Finance Interview Questions and Answers

You're just starting the finance recruiting season. You're an undergrad that needs to ace their finance job interviews. But, possibly, you're an MBA student that needs to land that top-notch offer at your dream private equity firm.

Most importantly, you're in luck! 

We've compiled a list of the most common and frequently asked finance interview questions across various career paths, from investment banking and private equity to equity research and accounting!

If you want to ace your finance interview, make sure you review and perfect the answers to the questions below. 

This guide is based on real questions asked at banks and is curated from Wall Street Oasis (WSO) global community with over 900,000 members that have been in your shoes.

In addition to this comprehensive guide to finance interview Q&A, you might also want to arm yourself with the complete Investment Banking Interview Prep Package and perfect your interview skills with some Mock Interviews with Experienced Wall St. Mentors.

Check out the full list of awesome Interview & Recruiting Prep Courses from WSO for more information.

For now, if you're looking for just the basic fresher on Finance Interview questions, look no further!

This guide features a total of 44 of the most common technical, transactional, behavioral, and logical questions, as well as proven sample answers to them, that are asked in finance interviews to candidates during the hiring process.

We have also added links to our very own WSO free complete interview guides at the end of each section, so you can further tailor your training for the role you're applying for and convert the interview into an offer!

This interview guide consists of 9 sections, starting with a section on general finance questions, followed by sections covering questions (technical and behavioral) for the respective job you're applying for.

10 Basic Finance Technical Interview Questions

Working on Laptop

A candidate's technical abilities and expertise are assessed critically in almost every finance recruiting and interview process. 

Your interviewers expect detailed and accurate responses to general finance questions, often asked in the beginning stages of the interview. Your answers must demonstrate technical mastery and expertise of the topic at hand.

The following section features 15 common finance interview questions for undergraduates and students and experienced professionals and MBA candidates. At the end of each question, we also provide a sample answer.

We feature the career-specific technical and behavioral questions sections to further tailor your training towards the role you're applying for at the end of these 15 questions.

1. What are the four financial statements?

Sample Answer:
The four financial statements are,

  • Income Statement,
  • Balance Sheet,
  • Statement of Cash Flows, and
  • Statement of Stockholders' Equity

2. How are the three main financial statements connected?

Sample Answer:
The three main financial statements are, 

  • Income Statement
  • Balance Sheet, and
  • Statement of Cash Flows

They are connected as follows:

  • Net income flows from the Income Statement into the Cash Flow from Operations on the Cash Flow statement
  • Net income reduced by dividends are added to retained earnings from the prior period's Balance Sheet to arrive at retained earnings as on the current period's Balance Sheet
  • Beginning cash on the Cash Flow Statement is cash from the prior period's Balance Sheet and Ending cash on the Cash Flow statement is cash on the current period's Balance Sheet

The following comprehensive chart summarizes the connections between the three main financial statements:

Three Statement linking

3. Briefly walk me through the Income Statement.

Sample Answer:
The first line of the Income Statement represents revenues or sales. From that, we subtract the cost of goods sold, which equals gross margin. 

Subtracting operating expenses from gross margin gives us operating income (EBIT). We then subtract (add) interest expense (income), taxes (refunds), and other expenses (income) to arrive at Net Income.

Cash and Income

4. What is EBITDA?

Sample Answer:
EBIDTA stands for Earnings before Interest, Depreciation, Taxes, and Amortization. 

It allows us to gauge a rough estimate of a company's profitability and is often a quick substitute for free cash flow. It allows you to determine how much cash is available from operations to pay interest, CAPEX, etc.

It can be calculated using the simplified formula of EBITDA = Revenue - Expense.
Lastly, EBITDA is also used in rough valuation as a metric, such as EV/EBITDA.

5. What are the ways you can value a company?

Sample Answer:
Some common valuation techniques are,

  • Comparable Companies/Multiples Analysis
  • Discounted Cash Flow (DCF)
  • Leveraged Buyout Model (LBO)
  • Precedent Transactions
  • Liquidation Valuation
  • Market Cap/Market Valuation

6. What is Enterprise Value?

Sample Answer:
Enterprise Value (EV) is the value of the entire firm, inclusive of debt and equity. In the event of acquisition without a premium, it represents the price that would be paid for the company by the acquirer. 

The formula for EV is,

EV = Market Value of Equity + Debt + Preferred Stock + minority interest - Cash

Value

7. Can a company have a negative book equity value?

Sample Answer:
Yes, a company can have a negative book equity value. Possible situations where this would occur are when there are large cash dividends or if the company has been operating at a loss for a long time, leading to taking on debt to stay operational.

8. What is WACC, and how do you calculate it?

Sample Answer:
WACC stands for Weighted Average Cost of Capital. It reflects the cost of the company raising new capital and reflects the riskiness of a company.

9. When do you use an LBO model?

Sample Answer:
LBO models are used when the firm uses a higher than normal amount of debt to finance the purchase of a company, then uses the company's cash flows to pay off the debt over time. 

In addition, the acquisition's assets may be used as collateral. Ideally, the acquisitions debt has been partially retired at the exit.

LBO Model

10. What is Beta?

Sample Answer:
Beta is a measure of the volatility of an investment relative to the market as a whole. We consider the market to have a beta of 1; investments considered more volatile than the market have a beta greater than 1, whereas contrasting investments less volatile have a beta of less than 1.

5 Advanced Finance Technical Interview Questions For Professionals / MBA Candidates

These are questions also asked for junior-year Summer Analyst, full-time Analyst, and MBA job interviews. These advanced finance questions require deeper thinking and understanding of corporate finance.

MBA/Professionals

1. What are some possible reasons why a company would issue equity rather than debt to fund its operations?

Sample Answer:
The company may decide to issue equity rather than debt for a variety of reasons, some of which are,

  • The company considers its stock price to be inflated, and therefore it can raise a large amount of capital compared to the percentage of ownership sold
  • The projects the company plans to invest in with proceeds may not produce immediate or consistent cash flows to pay the debt
  • The company wants to adjust the cap structure or pay down debt
  • The owners of the company want to sell off a portion of their ownership

2. What are the major factors that drive mergers and acquisitions?

Sample Answer:
Some major factors that potentially drive mergers and acquisitions are,

  • Diversification or sharpening on the market, or products of the company
  • Implementation of new technologies
  • Achieving synergies (cost savings)
  • Eliminating a competitor from the market or growing market share
  • Increase in supply-chain pricing power by buying a supplier or distributor
  • Improvement of financial metrics

M&A

3. How is it possible for a company to have a positive net income but go bankrupt?

Sample Answer:
The company may go bankrupt with a positive net income if working capital erodes (increasing accounts receivable and lowering accounts payable). It is also worth noting that financial fraud can also be a possibility.

4. How/ Why do you lever or unlever beta?

Sample Answer:
When beta is unlevered, the financial effects of debt in the capital structure are removed. This will help you analyze the risk of a firm's equity compared to the market. 

Further, when you are valuing a company that is not on the market and doesn't have a beta, you can compare it to a similar company on the market and unlever its beta as a proxy for the unlisted company's beta.

5. What is the difference between cash-based accounting and accrual?

Sample Answer:
Cash-based accounting recognizes sales and expenses when cash flows out of the company. Accrual-based accounting recognizes revenues and expenses as incurred regardless of whether cash flows out of the company at that exact time. In the finance industry, accrual-based accounting is the more popular method.

Cash vs Accrual basis of accounting

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5 Investment Banking Interview Questions

Wall Street

Investment Banking (IB) remains one of the most sought-after jobs for recent graduates and professionals alike in the finance industry. Bulge bracket investment banks such as Goldman Sachs have reported 2% IB internship acceptance rates in 2013, and the number has likely only decreased since then.

With that being said, it comes as no surprise that the investment banking interview process is highly competitive and designed to rigorously filter out potential candidates. Consequently, answering the behavioral, technical, and logical questions that are asked in the interview with proven answers that we provide is key to converting an interview into an offer.

The following section features five questions (4 technicals + 1 behavioral) to kickstart your training for investment banking interviews. It is a great place to start before checking out our free comprehensive Investment Banking Interview Questions and Answers page.

1. Which valuation methodologies result in the highest valuations?

Sample Answer:
The following list ranks the four valuation methodologies from highest valuation to lowest valuation:

  • Precedent Transaction - Since a company will pay a control premium and a premium for synergies arising from the merger, values tend to be high.
  • Discounted Cash Flow - Those building the DCF model are frequently optimistic in their projections. 
  • Market Comps - Based on other similar companies and how they are trading. There are no control premiums or synergies.
  • Market Valuation - Based on how the market is valuing the target. This only accounts for equity value, no premiums or synergies.

2. What does an investment banking division do?

Sample Answer:
The investment banking division is sometimes referred to as corporate finance and is broadly split into two sectors, products and industries. Both sectors service the purpose of providing advisory on transactions, mergers, and acquisitions and arranging (and sometimes even providing) financing for these transactions.

Investment banking product groups are broken down into

  • Mergers and Acquisitions (M&A): Advisory on sale, merger, and purchase of companies.
  • Leveraged Finance (LevFin) - Issuing high-yield debt to firms to finance acquisitions and other corporate activities.
  • Equity Capital Markets (ECM) - Advice on equity and equity-derived products (IPOs, shares, capital raises, secondary offerings, etc.)
  • Debt Capital Markets (DCM) - Advice on raising and structuring debt to finance acquisitions and other corporate activities.
  • Restructuring – Improving the structures of a company to make it more profitable or efficient."

*Taken from WSO's "What is Investment Banking."

EV ESG

3. If enterprise value (EV) is $80mm, and equity value is $40mm, what is the net debt?

Enterprise Value = Equity Value + Net Debt + Preferred Stock + Minority Interest

Sample Answer:
If we assume there is no minority interest or preferred stock, the Net Debt will be $80mm – $40mm, or $40mm.

4. All else equal, should the WACC be higher for a company with a $100 million market cap or a $100 billion market cap?

Sample Answer 1:
Typically, we consider the larger company to be "safer" and consequently should have a lower WACC, all other factors being equal. However, depending upon their respective capital structures, the larger company may potentially also have a higher WACC.

Sample Answer 2:
Without knowing more information about the companies, this is impossible to say. If the capital structures are the same, the larger company should be less risky and therefore have a lower WACC. However, if the larger company has a lot of high-interest debt, it could have a higher WACC.

5. Why do you believe you will be a competent investment banking analyst?

Highlight three to four of the following points:

  • Work ethic
  • Positive attitude
  • Quantitative and analytical skills
  • Team spirit
  • Communication ability
  • Eagerness to learn
  • Appetite for work
  • Efficiency of organization
  • Detail orientation
  • Ability to get everything done with a smile

Sample Answer:
To be a successful analyst, you have to be well-rounded. But, of course, no single quality makes a good analyst. Still, I think three characteristics are probably most important: maintaining a positive attitude, being extremely hard-working, and knowing how to be a strong team player.

WSO’s Free 101 Investment Banking Interview Guide

All of the above questions have been taken from our WSO official free Investment Banking Interview Questions and Answers page. 

The guide features 101 of the most common technical, behavioral, logical, and group-specific questions that investment banking professionals ask candidates during the hiring process, as well as sample answers to each one of them. 

The resource includes 21 bank-specific questions from bulge bracket investment banks (Goldman Sachs, J.P Morgan, Citi, etc.).

5 Private Equity Interview Questions

PE

Professionals often consider Private Equity (PE) one of the hardest sectors to break into within the finance industry. Nevertheless, vast amounts of talented professionals from various backgrounds (investment banking, asset management, etc.) apply to private equity firms, seeing them as the golden exit opportunity due to generally better pay and better hours. 

Therefore, the competitive interview process is designed to rigorously filter out potential candidates, with less than 1% of candidates receiving job offers.

The following section features five questions (4 technicals + 1 behavioral) to kickstart your training for private equity interviews. It is a great place to start before checking out our free comprehensive Private Equity Interview Questions and Answers page.

1. How would you successfully close a deal if you and the seller disagree on the price of an asset due to different projections of its future operating performance?

Sample Answer:
A classic PE solution to this common problem is an "Earn-out." This is because sellers are typically more optimistic about a business's future performance than what PE investors are willing to underwrite. 

In such instances, either party may propose that the sellers are paid a portion of the total acquisition price up-front. In contrast, a portion is held back (frequently in an escrow account) until the business' actual future performance is determined.

If the business performs in line with the seller's expectations, then the seller is paid the remainder of the purchase price some months or years after the close of the deal. However, if the business under-performs the seller's expectations, the buyer keeps some or all of the earn-out money. 

This type of structure is a common way of bridging valuation gaps between buyers and sellers.

Balancing price

2. What are some common methods PE firms use to increase portfolio company value?

Sample Answer:
How much value PE firms add is an open question, but the following methods are frequently mentioned:

  • Recruit more competent management and board members
  • Provide more aligned management incentives (typically via stock option pool)
  • Identify and finance new organic growth opportunities (new geographies, product lines, adjacent market verticals, etc.)
  • Find, finance, and execute add-on acquisitions
  • Foster stronger relationships with key customers, suppliers, and Wall Street
  • Support investment in better IT systems, financial reporting and control, research & development, etc.

3. What are some pros and cons of market value?

Sample Answer:
Pros:

  • Market value is always up-to-date and is instantly available for public companies.
  • Market value is determined by and fundamentally based on the individual decisions of numerous investors, therefore reflecting the collective work and judgment of people.

Cons:

  • The market can be wrong, sometimes by a considerable margin. If it wasn't, hedge funds and other public market investors (Warren Buffett) would seldom beat the market.

Money

4. Tell me why each of the financial statements by themselves is inadequate for evaluating a company?

Sample Answer:
There are many reasons why each of the financial statements is inadequate for evaluating a company. A few reasons for each one are listed below.

  • Income Statement:

The income statement alone won't tell you whether a company generates enough cash to stay afloat or solvent. You need the balance sheet to tell you whether the company can meet its future liabilities, and you need the cash flow statement to ensure it is generating enough cash to fund its operations and growth.

  • Balance Sheet:

The balance sheet alone won't tell you whether the company is profitable because it is only a snapshot on a particular date. 

For example, a company with few liabilities and many valuable assets could be losing a lot of money every year.

  • Cash Flow Statement:

The cash flow statement won't tell you whether a company is solvent because it could have massive long-term liabilities which dwarf its cash-generating capabilities.

The cash flow statement won't tell you whether the company's ongoing operations are profitable because cash flows in any given period could look strong or weak due to timing rather than the underlying strength of the company's business.

5. Why are you interested in X PE Firm?

The interviewer wants to make sure that you are truly serious about their firm and that there is likely to be a good fit between you and the firm. 

Therefore, your goal should be to demonstrate your clear interest by showing you've spent time researching the firm and have specific reasons to be interested in it.

Before you go into an interview, dig up some of the basic information about it:

  • Its origin, age, fund size, office locations, industry focus, investment criteria, etc.
  • Bios of some of it investment professionals, especially those likely to interview you
  • Existing and past deals/portfolio companies
  • How they describe themselves / how they see themselves / what makes their investment process or culture unique

Interview

Great resources for learning the above include:

  • The firm's website is first and foremost. It frequently has an "about the firm" section, IP bios, investment criteria, existing portfolio, and past deal examples or case studies
  • CapIQ and other similar data providers also frequently have some of the above data
  • Google the company's name for news articles, especially press releases on new investments and exits
  • Search for WSO threads about the company and read the WSO database entries on the company
  • If you have friends who work there or have worked there - they can, of course, be a great resource

WSO’s Free PE Interview Guide

All of the above questions have been taken from our WSO official free Private Equity Interview Questions and Answers page. 

The guide features a total of 40 of the most common technical, transactional, behavioral, and logical questions, along with proven sample answers that private equity professionals ask candidates during the hiring process. 

We have also added dedicated sections discussing previous deal experiences and featured a free LBO modeling test (video solution + modeling file) at the end of the guide to perfect your modeling skills!

5 Hedge Funds Interview Questions

Hedge Funds

Hedge Funds are one of the main movers of global markets and key influencers of global liquidity. With the lucrative bonus packages offered by hedge funds, it is not uncommon to hear hedge fund analysts in their mid-to-late-twenties making well into the half-million-dollar range per year or more. 

Given this, it comes as no surprise that hedge funds are extremely selective with their hiring process, as they rigorously filter out thousands of potential applications annually to settle for only the best.

The following section features five questions (4 technicals + 1 behavioral) to kickstart your training for hedge fund interviews. It is a great place to start before checking out our free comprehensive Hedge Funds Interview Questions and Answers page.

1. What's the difference between intrinsic and book value, and how can they deviate?

Sample Answer:

  • Book value is what assets are carried out on a company's balance sheet. Book value and Price to Book are common valuation measures for value-conscious investors.
  • Intrinsic value is the belief of what a business is truly worth.
  • The intrinsic value would consider intangible assets not properly valued or carried on the balance sheet – like the brand value of Coca-Cola.
  • Additionally, sometimes when a holding company acquires a portfolio company, it is carried at cost on the balance sheet, and its value won't be "written up" to its intrinsic value over time as the company grows.
  • However, companies must write down intangible assets that lose value as per accounting standards.

Intrinsic vs book value

2. What are Deferred Tax Assets (DTA) and Deferred Tax Liabilities (DTL)? How are they created in an M&A transaction?

Sample Answer:

  • A DTL occurs when the company has paid fewer cash taxes than it owes therefore compensated for by paying additional taxes to the government sometime in the future.
  • A deferred tax asset occurs when a company pays more taxes to the government than they show as an expense on their income statement in a reporting period.
  • DTAs and DTLs are often created in an M&A transaction through the write-up or write-down of assets.
  • If an asset is written up, the company will record a profit, and a DTL is created as the new asset will hold a higher depreciation expense in the short term, translating into the company paying lower taxes. These taxes must be paid back at some point, which is why liability is created.
  • The opposite is true when an asset is written down in value.

3. Let's suppose implied volatility (IV) for security is extremely high. Why could this be, and how would you profit from this?

Sample Answer:

  • Implied volatility represents the expected volatility in a security and potentially may be high during times of company-specific events like earnings or due to volatility in the broader sector or market during a correction.
  • You can chart a security's implied volatility to see where it stands relative to historical levels.
  • Suppose you believe that implied volatility is overstated for a company's options. In that case, you should sell the one with the higher premium that is expected to fall, therefore allowing you to (1) Cover at a lower IV and lower price or (2) Hold your option trade through expiration and let them expire.
  • You can sell premium by shorting calls or shorting puts, depending on if you have a view on the direction in the security. You could also write covered calls or short a straddle. A short straddle is writing puts and calls at the same strike and betting that the underlying security won't move as much as the market expects by expiration. In other words, realized volatility will be less than what's priced in.

High volatility

4. What are typical default rates for high-yield bonds? What are typical recovery rates for these bonds? What impacts their recovery?

Sample Answer:

  • The historical average default rate for high-yield bonds is just under 5%. 
  • Historically, it has doubled to around 10% in times of distress around recessions.
  • The 1-year default rate for a bond that is already distressed is slightly higher at 15-20%.
  • The recovery rate for a distressed bond depends on where a bond falls in the capital structure compared to other creditors. The higher the seniority, the greater the chances of recovering debt. The recovery rate has historically been around 40% for senior unsecured debentures. The type of recovery also impacts the recovery rate – Bankruptcy or distressed exchange. Distressed exchanges have had better recovery rates lately. Recovery rates are published annually by the credit rating agencies.
  • Recently, distressed bonds have had better recovery rates, especially in energy defaults.

5. What's the single most impressive experience on your resume?

Have one experience in mind that you feel is most impressive to the position you are applying for, and talk about it in depth. Then, explain the important facets of the experience and how they relate to the job you are applying for.

Sample Answer:
"The most impressive experience on my resume was my experience last year as an intern at a hedge fund after my sophomore year. As the only intern at the firm, I effectively managed multiple tasks from multiple bosses. As a result, I learned throughout the summer how to accomplish everything asked of me efficiently and accurately. 

I took on tasks such as some basic modeling of a company's projected revenues based on different drivers and qualitative analysis of a few different industries, putting together PowerPoint presentations for the senior members of the team. 

Even though I was just an unpaid intern, I was considered an integral part of the team and was expected to work long, intense hours, which gave me a feel of what I should be expecting as I enter the workforce."

 

WSO’s Free Hedge Fund Interview Guide

All of the above questions have been taken from our WSO official free Hedge Funds Interview Questions and Answers page. 

Our guide features a total of 40 of the most common technical, behavioral, and logical questions, along with proven sample answers, that are asked by hedge funds professionals to candidates during the hiring process. 

This resource includes 13 firm-specific questions from leading hedge funds (Bridgewater Associates, Citadel, etc.) and proven sample answers.

5 Equity Research Interview Questions

Equity research

Equity Research (ER) attracts seasoned professionals and new hires with various talents and diversified skill sets across the world for a fulfilling career. New hires starting right out of school will start as research associates and move up the chain to becoming research analysts after gaining experience in the industry.

Given the limited number of positions for an incredibly large amount of applicants, it is no surprise that the interview process is designed to be incredibly competitive.

The following section features five questions (4 technicals + 1 behavioral) to kickstart your training for equity research interviews. It is a great place to start before checking out our free comprehensive Equity Research Interview Questions and Answers page.

1. How do you value a private company?

Sample Answer:

  • You can value a private company using the same techniques you use for a public company, with a few exceptions that are mentioned below:
    • You cannot use a straight market valuation as the company is not publicly traded.
    • A DCF can be complicated by the absence of an equity beta, which increases the difficulty of calculating WACC. In such a situation, you have to use the equity beta of a close comp in your WACC calculation.
  • Financial information for private companies is relatively harder to obtain because they are not required to make public online filings.
  • An analyst may apply a discount on a comparable company's valuation if the comps are publicly held because a public company will demand a 10-15% premium for the liquidity an investor enjoys when investing in a public company.

2. What is the market risk premium?

Sample Answer:
The market risk premium is the excess return that investors require for choosing to purchase stocks over "risk-free" securities. It is calculated as the average return on the market (normally the S&P 500, typically around 10-12%) minus the risk-free rate (current yield on a 10-year Treasury).

Graph picture

3. When should an investor buy preferred stock?

  • Preferred stock could be looked at as a cross between debt and equity. It will normally provide investors with a fixed dividend rate (like a bond) and allow for some capital appreciation (like a stock). 
  • Preferred stock may also have a conversion feature that allows shareholders to convert their preferred stock into common stock.
  • It typically does not have voting rights like those of common stock.
  • It is senior to common stock within the company's capital structure.

Sample Answer:
An investor should buy preferred stock for the upside potential of equity while limiting risk and assuring stability of current income in the form of a dividend. Preferred stock's dividends are more secure than those from common stock. In addition, owners of preferred stock enjoy a superior right to the company's assets, though inferior to those of debt holders, should the company go bankrupt.

4. When should a company buy back stock?

Sample Answer:
A company should buy back its stock if it believes it is undervalued when it has extra cash or wants to increase its stock price by increasing its EPS by reducing outstanding shares or sending a positive signal to the market. However, if it believes it can make money by expanding its operations, it might not be a good idea to buy back stock. Also, a stock buyback is the best way to return money to shareholders, as they are tax-efficient compared to dividends.

5. What makes you think you can put up with the stress, pressure, and long hours of a career in finance?

Tell a story of a time in your life when you managed many different tasks and worked long hours. 

The story can be from school, work, home, or a combination of all of them. 

For example, maybe during finals week, you wrote three papers while studying for two exams, finalizing the school newspaper, and still going to soccer practice.

Make sure to explain that you know your experience has not been as intense as what you will face as a finance professional. Still, you feel as well prepared as anyone, and you are 100% dedicated to succeeding, whatever it takes.

Night city

Sample Answer:
"I genuinely feel I am as prepared as anyone else coming out of college to handle the long hours. When you add up all the time I spent doing all my different activities, school hours were almost as long. Every day I was up at 7:30 for classes that ran from 8:15 until 1:00. Then, after class, I would grab lunch and then go to soccer practice, which means I didn't get back until 5:00. 

Then I would grab dinner and work in either my room or the library until I was done, which usually wasn't until pretty late at night or into the morning. So while I know it isn't the same stress and time commitment as finance requires, I feel my experience has left me well prepared."

WSO’s free Equity Research Interview Guide

All of the above questions have been taken from our WSO official free Equity Research Interview Questions and Answers page. 

Our guide features a total of 40 of the most common technical, behavioral, and logical questions, along with proven sample answers, that are asked by hedge funds professionals to candidates during the hiring process. 

This resource includes eight firm-specific questions from leading hedge funds (Point72, D.E. Shaw Group, etc.) and proven sample answers.

5 Accounting Interview Questions

Accounting and taxes

Accounting has been considered the benchmark for a stable and growing career path in the vast world of finance for over decades now. Therefore, it establishes itself as a compelling career prospect for various professionals, from individuals looking for long-term job security to professionals beginning their career at a Big Four accounting firm before lateraling to other financial fields, such as investment banking or private equity.

The competitive interview process seeks to identify and reward well-equipped applicants with strong technical and financial skills as well as good attention to detail.

The following section features five questions (4 technicals + 1 behavioral) to kickstart your training for accounting interviews. It is a great place to start before checking out our free comprehensive Accounting Interview Questions and Answers page.

1. What is the purpose of the changes in the working capital section of the cash flow statement?

Sample Answer:
Due to accrual accounting, certain non-cash items affect both the income statement and balance sheet, examples of which are accounts payable and accounts receivable. Therefore, to reverse the effects of the non-cash items, we adjust for them in the "Changes in working capital" section.

Sample Follow-up Question: What does it mean if your change in net working capital is negative on the statement of cash flow? Is negative working capital a bad thing for a company? 

Sample Follow-up Answer:
While negative working capital by pure definition (i.e., current liabilities > current assets) may indicate a solvency issue for a company or an inability to satisfy its obligations, negative working capital may not necessarily be considered a bad thing. 

Suppose a company is making a concerted effort to stretch out its payment terms with its vendors as much as possible to preserve its cash position (which is not included in the calculation of working capital). In that case, this will lead to negative working capital (since Accounts Payable would likely cause an excess of current liabilities over current assets). 

The company still has the liquidity to satisfy its obligations, but stretching out the vendor payment provides the company with the most flexibility.

2. What is the difference between accounts payable and accrued expenses?

Sample Answer:
Accounts payable and accrued expenses are fundamentally similar. The main difference is that accounts payable is typically a one-time expense with an invoice (such as the purchase of inventory). In contrast, accrued expenses are recurring (like employee expenses). It is worth noting that both accounts are reflected in working capital calculations.

3. What is a deferred tax liability, and why might one be created?

Sample Answer:

  • Deferred tax liability is a tax expense amount reported on a company's income statement, although not actually paid in cash during that accounting period but expected to be paid in the future. This occurs when a company pays fewer taxes to the government than they show as an expense on their income statement.
  • This can be caused due to differences in depreciation expense between book reporting (GAAP) and tax reporting. This will lead to differences in tax expenses reported in the financial statements and taxes payable to the government.

Question mark

4. Give some examples of accounting events typically involved in compound entries.

Sample Answer:
Examples of such accounting events would be:

  • Bank deductions which are associated with a bank reconciliation
  • Deduction of expenses related to payroll payments
  • Sales transaction subject to sales tax 

5. Discuss your mathematical and quantitative skills relative to what a career in accounting requires.

You will need to be comfortable with numbers and generate formulas and perform calculations using Excel.

It is beneficial to talk about how you have managed your portfolio, completed a self-study modeling course, took the accounting or finance courses offered at your school, etc.

Sample Answer:
Although I majored in English, I have had an independent interest in accounting since I interned at a big four accounting firm in my first year of university. Ever since I completed that project, I have managed my portfolio of limited savings, investing in companies that I view as safe, long-term growth plays through simple fundamental analysis. As a result, I have achieved an average annual return of 15% on my portfolio over four years.

Calculator

 

WSO’s Free Accounting Interview Guide

All of the above questions have been taken from our WSO official free Accounting Interview Questions and Answers page. 

Our guide features a total of 33 of the most common technical, behavioral, and logical questions, along with proven sample answers

This resource further includes 12 firm-specific questions from the big four accounting firms (Deloitte, KPMG, etc.) and proven sample answers to them.

4 Logical Puzzles - Interview Brain Teasers

Jigsaw puzzle

Finance interviews also generally consist of a component dedicated to testing the logical thinking abilities of the candidate, which are indicative of their performance on the job later on.

Logical puzzles, brainteasers, and riddles have cemented themselves as important components of the interview process due to their nature, allowing the interviewer to determine your critical thinking abilities.

It is worth noting that for this section of the interview, interviewers aren't focused on whether you get the right answers or not. Rather, they are interested in your thought process while solving the riddles you are presented with.

Given this, it is key to walk your interviewer through your thinking as you progress through the riddle, who may even probe you with questions to assist you. Giving them a rundown of your thoughts and occasionally asking if you're headed in the right direction demonstrates your capabilities to reflect and approach a problem with composure.

However, it is still extremely useful to anticipate these logical puzzles beforehand to avoid being put on the spot and caught off guard in the interview. The following section has four commonly asked logical puzzles that you can prepare beforehand to impress your interviewer.

1. What's 17 squared? What's 18x22?

Answer:
Don't worry; they want to know how you will handle this question, and it is not difficult if you think about it correctly.

  • Think 17 x 17 is just 17x10 plus 17x7. You know 17x10 is 170. Now17x7is 10x7 and 7x7. This gives you 170+70+49, or 289. Whatever you do, don't panic!
  • Now see if you can do 18x22: 18x20 + 18x2. Easy, 360 + 36=396.
  • As far as brainteasers go, this is a rather common one. You will do better if you have practiced these types of questions.

Calculator

2. A stock is trading at 10 and 1/16. There are 1 million shares outstanding. What is the stock's market cap?

Answer:
This is just a test of your mental math.
If a fourth is .25, an eighth is .125, and a sixteenth is .0625...
The stock price is 10.0625, and the Market Cap is 10.0625 million.

3. What is the probability that the first business day of the month is a Monday?

Answer:
Each day has a 1 in 7 chance of being the first day of the month. However, if the month starts on a Saturday or a Sunday, the first business day of the month will be a Monday. Therefore, the chances of the first business day being a Monday is 3 in 7 since if the month starts on Saturday, Sunday, or Monday, the first business day is a Monday.

Calendar

4. A car drives from point A to point B at 60 MPH. It then returns from point B to point A at 30MPH. What is the average speed of the total round trip?

Answer:
A lot of people say 45mph, which is wrong. Average speed equals total distance over total time. In this case, let's assume the distance between A and B is 60 miles. The first leg of the journey takes one hour, and the return trip takes 2 hours. Therefore, the total distance traveled is 120 miles, and the total time the trip takes is 3 hours. Therefore, the average speed of the round trip is 120 miles / 3 hours = 40mph.

 

WSO Interview Prep Guides & Additional Resources

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