28 Most Important Finance Interview Questions

Finance is the distribution of assets, liabilities, and cash throughout time, process, and mediums to maximize investment return. In other words, it is managing or multiplying funds to maximize returns while addressing risks and uncertainties. Personal finance, corporate finance, and public finance are the three primary areas of finance. 

There are opportunities to work in finance all across the world. Aspirants often worry about the job interview questions in finance they must prepare but do not know how to go about it.

People with finance skills are required by any corporate or business entity to manage its financial affairs efficiently. A financial specialist is frequently in charge of investments, accounts, and financial papers. It is critical for anybody contemplating a career in finance to understand his/her possibilities in order to determine whether the financial industry is suited for him/her. 

This article is a compilation of finance-related interview questions for freshers, intermediate, and senior-level aspirants. We will discuss the basic finance questions and answers that you might be asked and that will help you prepare well for your interview.

Before delving deeper into the finance interview questions and answers that you may be asked, take a look at the why you can choose finance as a career.

Why to Choose Finance as a Career?

Finance offers a range of opportunities for those seeking a rewarding and challenging career. It combines analytical skills, strategic thinking, and a deep understanding of financial systems. Finance professionals, such as financial analysts or investment bankers, often enjoy competitive salaries and attractive benefits packages. In this blog let us look into finance interview questions and financial analyst interview questions. Read more on Financial Analysis, Valuation, & Risk Management

Most asked Finance Interview Questions 

These basic finance interview questions have been divided as per the level of difficulty.

Please tell me about yourself

This is one common finance interview questions you will be asked in every interview you face.

In an interview, asking about oneself is a good technique to start off and make you feel more at ease. It also allows the interviewer to judge whether you are a good match for the position.

Consider what you want to say about yourself to potential employers before going on an interview. An excellent technique to prepare an answer is to prepare a brief summary of your past.

Finance interview questions and answers for freshers

Let’s look at the most common finance interview questions for freshers.

1. What exactly is Working Capital?

   Any list of finance-related interview questions for freshers must have this question!

   Working capital is the amount remaining after subtracting current obligations from current assets. It informs you how much cash is locked up in the firm through inventories and accounts receivable, as well as how much cash is required to pay off the company’s short-term commitments (in the coming 12 months).

2. Why do you believe financial management is important for a business?

   The interviewer will determine if you are pursuing finance management as a career for the sake of earning money or because you share the same perspective on the key aims and principles of financial management.

   You can answer along the lines of:

   Financial management is essential for each organization, regardless of size, because it helps the firm function smoothly. A sufficient supply of cash, controlling shareholders’ ROIs, developing financial policies, submitting tax returns, meeting legal requirements, and assuring financial control all contribute to a company’s ability to meet organizational and legal obligations.

3. Why do capital expenditures build assets while other cash outflows create expenses?<H3>

   Capital expenditures are capitalized because they provide long-term advantages to the company. For example, a new branch would generate a lot of money for the company for a long time, while an employee’s labor will only help the company until the time comes to pay the salaries, which is why they incur a cost. This is the main distinction between an asset and a cost.

4. How would you define the term “goodwill”?

   Goodwill is defined as the difference between the cost price and the essential market value. Fundamentally, goodwill is classified as an intangible asset.

5. What exactly do you mean by hedging?

   Hedging is a risk management approach that we use to offset investment losses. We accomplish this by taking an opposing position in a linked asset. 

   However, reducing the amount of risk by hedging leads to a corresponding reduction in potential profit. Hedging is comparable to having insurance in that you pay a set premium and receive guaranteed recompense.

   If the asset in issue creates a loss, the opposing position in the connected asset will compensate for this loss. This is why a hedger differs from a speculator in that a hedger focuses on limiting risks rather than increasing earnings.

   Let’s move to the next finance interview questions.

6. What are the several financial career paths you can choose?

   There are several financial career paths you may choose and a number of professions and specialties to suit a wide range of abilities and interests. 

   • Insurance
     A job in insurance may help organizations and people foresee future risks and avoid financial losses. Sales representatives, claims adjusters, agents, customer service representatives, and risk consultants are all examples of insurance employment. Many insurance positions are with huge corporations, although they may also be found in smaller enterprises.
   • Hedge Funds
     Hedge fund roles usually oversee the purchasing and selling of assets and financial products for private investment firms. Hedge funds are frequently smaller companies where employees may have greater autonomy over their job.
   • Investment Banking
     An investment banker often serves as a financial counselor to customers in order to assist them to increase their earnings. Positions in investment banking include sales and trading, research analysts, and mergers and acquisitions. Investment bankers frequently give financial advice, manage assets, trade stocks and bonds, and finance transactions. They may provide these services to individuals, businesses, non-profit organizations, or government agencies.
   • Commercial Banking
     Working in commercial banking entails assisting clients with their financial requirements at a bank. Bank tellers, loan officers, mortgage bankers, bank examiners, and branch managers are all commercial banking jobs. Commercial bankers may provide financial services such as managing, checking and savings accounts, retirement accounts, and loans.

   Let’s move to the next finance interview questions.

   Also read about; How Financial Analysis Plays an Important Role for Businesses.

7. What does Working Capital Mean?

   One of the common finance interview questions and financial analyst interview questions – working capital refers to the capital required by a business for day-to-day operations, measuring short-term liquidity and the ability to cover financial obligations.

8. Explain a Cash Flow Statement.

   A cash flow statement tracks cash inflows and outflows, providing an overview of how cash is generated and used by a business. This is a vital finance interview question and financial analyst interview questions. Explore what is Financial Analysis: Meaning, Importance & Functions.

9. What do you Mean by Hedging?

   Hedging is a risk management strategy used to offset potential losses from adverse price movements in financial markets, a critical finance interview question and financial analyst interview questions.

10. What do you Mean by Preference Capital?

    Preference capital, or preferred stock, represents capital that ranks higher than common equity but lower than debt in terms of priority during liquidation, a frequent finance interview questions and financial analyst interview questions.

Let’s move to the finance interview questions for intermediate. 

Financial analyst questions and answers for intermediate level 

Let’s look at the finance interview questions for intermediate. 

1. What is the difference between a stock split and a stock dividend?

   A stock split occurs when a firm divides its equity into two or more parts, for instance, a 2 for 1 split. A firm may split its shares for a variety of reasons. 

   One of the reasons is to make the stock available to investors who want to invest in the stock of low-cost enterprises. The likelihood of growth for such stocks rises as well. A stock dividend is when a corporation distributes extra shares as dividends rather than cash.

2. What is the clean and dirty bond price?

   A clean price is the price of a coupon bond that does not include interest. In other terms, the clean price is the present value of a bond’s discounted future cash flows and fewer interest payments. 

   In the computation of a bond’s dirty price, the accumulated interest is included. The dirty bond price is the present value of a bond’s discounted future cash flows, which include interest payments made by the issuing firm.

3. How would you handle a mistake made by a subordinate during a critical period of a project?

   I usually arrange my initiatives so that there is ample room for such obstacles. If a subordinate makes a serious error, I will do my best to teach him/her what he/she did wrong, how he/she may prevent it next time, and engage him/her in a brief practice exercise before allowing him/her to work on the same subject again.

   Let’s move to the next finance interview questions.

4. What specifically do you mean by “fair value”?

   The term “fair value” refers to an impartial and realistic evaluation of an asset’s, good’s, or service’s possible market price. The fair value of an asset is the price at which it may be bought or sold in a current transaction between interested parties that is not a liquidation. Similarly, the fair value of liabilities is the amount that can be incurred or settled in a current transaction between two willing parties that is not a liquidation.

5. What is the Rights Problem?

   A rights offering is an issue that is exclusively available to the company’s current shareholders at a fixed price. When a corporation wants to raise funds, it will make this offer. 

   Rights issues may be seen negatively since the firm may be unable to meet its future commitments with the cash generated by its current operations. One must delve deeper to understand why the firm needs to obtain funds.

   Let’s move to the next finance interview questions.

6. What is the Difference Between Cost Accounting and Costing? (Finance interview questions and financial analyst interview questions).

   Also read Financial Accounting VS Management Accounting.

   Cost Accounting	Costing
   Focuses on recording and analyzing costs incurred by a business.	Determines the cost of producing specific goods or services.
   Provides detailed information for decision-making and cost control.	Focuses on cost accumulation and allocation.
   Includes methods like job costing, process costing, and activity-based costing.	Enables cost comparisons, cost estimation, and budgeting.
   Enables tracking and analyzing costs by different departments or activities within a company.	Helps in determining the cost per unit of output or service.
   Helps in calculating variances and analyzing cost behavior.	Assists in pricing decisions and evaluating profitability.
   Used for internal management purposes and financial reporting.	Primarily used for estimating and controlling costs in production.

7. What is a dividend growth model? (Common finance interview questions and financial analyst interview questions)

   A dividend growth model is a valuation method used to estimate the intrinsic value of a stock based on its expected future dividends.

8. What is RAROC?

   RAROC (Risk-Adjusted Return on Capital) is a risk management tool that calculates the return on capital adjusted for the level of risk undertaken.

9. What is deferred tax liability and assets?

   Deferred tax liability and assets arise from temporary differences between taxable income and financial accounting income.

Let’s move to the finance interview questions for advanced role. 

Financial analyst questions and answers for advanced level roles

Let’s look at the finance interview questions for advanced.

1. What exactly do you mean by “Put Option”?

   A put option is a financial market derivative product that permits the holder to sell an asset to the writer of the put at a certain price by a specific date. The purchase of a put option communicates a negative statement about the stock’s future.

2. What is the distinction between earnings per share and diluted normalized earnings per share?

   Earnings per share (EPS) and diluted earnings per share (EPS) are used to calculate a company’s profitability. However, EPS only covers common stock, whereas diluted EPS includes convertible securities such as convertible bonds and preferred stock.

   Let’s move to the next finance interview questions.

3. What exactly do you mean by interest rate swap?

   Companies can use interest rate swaps to exchange their interest rate payments. When one firm prefers a variable interest rate and another prefers a fixed-rate payment, they are quite useful. In an interest rate swap, the length and conditions of the exchange are the most important aspects.

4. Is it viable for a company to have a positive cash flow while still having significant financial difficulties?

   These types of finance manager interview questions and answers could be answered in the following ways:

   Yes. Even if a firm is in crisis, a corporation that is selling off goods but postponing payables will have a positive cash flow for a time.

   A company’s revenues were excellent during the era, but future projections predict that revenues will fall.

   When you characterize such scenarios, it demonstrates that you are not looking at cash flow figures; rather, you are concerned with where the cash is coming from or going to, and you note all the points emphasizing how the organization is generating or losing money.

   Let’s move to the next finance interview questions.

5. What do you Mean by the Put Option?

   A put option is a financial contract that gives the holder the right, but not the obligation, to sell an asset at a specified price within a predetermined period.

6. What do you Mean by Deferred Tax Liability?

   Deferred tax liability refers to a tax obligation that arises from temporary differences between taxable income and financial accounting income.

   7. What is the Difference Between a Journal Entry and a Ledger?

   Journal Entry	Ledger
   The initial step in the accounting cycle where transactions are recorded in chronological order.	A book or a computerized system that contains all the accounts and their balances.
   Includes the date, accounts affected, debits, and credits for each transaction.	Summarizes and classifies transactions recorded in the journal.
   Used to record and track individual transactions as they occur.	Provides a complete record of accounts and their balances.

   8. Importance of preparing for a finance role interview

   Preparing for a finance role interview is crucial to demonstrate your knowledge, skills, and suitability for the position. It allows you to showcase your expertise and stand out among other candidates.

    

   We hope the above will prove to be beneficial for you to prepare for your Finance interview question.

   Interview Tips for Finance Roles

   In this guide we have covered the major finance interview questions, Let’s look at some of the tips to prepare for it.

   1. Research the company and industry.
   2. Understand the role and its requirements.
   3. Prepare answers to common finance interview questions.
   4. Showcase your technical skills and knowledge.

   While it might be difficult to prepare all of these finance interview questions and answers, by enrolling in a Certificate Program in Finance, you may expedite the learning process and receive individualized attention. HeroVired’s various courses on finance may help you achieve what you want as an aspirant in the field of finance. 

   The best approach to prepare is to read financial news on a regular basis or watch daily market coverage on television. An interviewer may inquire about your financial news habits and request that you describe a recent news article that piques your attention.

   Remember to plan ahead of time, stay current on financial news, and understand the fundamentals of money. Show off your analytical abilities – a quick response is unlikely to suffice. Enrolling in a program such as the Certificate Program in Financial Analysis, Valuation & Risk Management can definitely help you learn the skills you will need.

   Allow the interviewer time to examine your responses and watch how you think. Highlighting your analytical talents and capacity to think things through will help you stand out in an interview, increasing your chances of landing the job.

   Hero Vired’s several courses on finance will help you plan ahead of time and they come with the best features. A program such as the Online Course in Finance & Financial Technologies is also a great choice.

   The programs at Hero Vired are designed to help you establish your expertise as a finance professional and become the one who can forecast future trends.

   In collaboration with edX and Columbia University, Hero Vired provides India’s only pure finance-focused curriculum and will provide a solid foundation in the basic areas of financial analysis. With the courses being online, you can always take them up even if you are a working professional.

   Conclusion

   Career in finance offers lucrative opportunities, diverse paths, intellectual stimulation, and the chance to make an impact in the financial world. By understanding key concepts and preparing finance interview questions and finance interview questions, you can position yourself for success in this dynamic field.