Interviews demand nothing more than a deep-seated knowledge about your subject. So, it is important to prepare well for your interview. Here, we have listed 10 important Finance Interview Questions that are generally asked in a Finance interview.
Finance Interview Questions and answers
1. What do you understand by the term working capital?
Working capital may be defined as the overall, generalized portrait of an organization’s assets. Technically speaking, the working capital is the current assets minus the current liabilities. Basically, the working capital is chiefly concerned with the estimates of cash present in the organization.
2. Do you think it is possible that a company with an assertive cash flow can still find itself in dire straits?
Indeed, it is possible. In fact, there is no such corresponding relationship. Specifically speaking, a company which sells inventories and delays the concerned payables will reflect substantial cash flow but is essentially in financial trouble. Apart from that, a company’s prospective revenues may hint at a strenuous situation, even though the company’s present revenues are very much kicking.
3. Can you define the meaning of goodwill?
Goodwill may be defined as the redundant value of the cost price against the essential market value of the same. Fundamentally, goodwill qualifies in the category of intangible assets.
4. Can you highlight the meaning and purpose of a deferred tax liability?
Essentially, a deferred tax liability comes into the view when the concerned amount of tax is shelled at a future date to the IRS. In fact, it can be summed up as the opposite of the deferred tax asset. Generally speaking, the case for deferred tax liability arises when there is a discrepancy between the IRS reporting and the GAAP reporting. Such subtle differences might eventually translate to the payment of lower taxes to the IRS.
5. What do you understand by the term debentures?
A debenture is nothing but a certificate of loan agreement furnished under the company’s stamp. Essentially, the debenture holder is mandated to receive a fixed return along with the principal amount at the time of the maturity of the debenture.
6. Highlight the difference between real money and nominal money. Also, explain the meaning of treasury bills.
Real money is the one which is loaded with its basic purchasing potency. Nominal money, on the other hand, is related to the aspect of technical enumeration or counting. So it turns out the nominal money is what reflected in the bill.
Treasury bills may be defined as the money market instruments in order to sponsor the short term financial requisites of the Government of India. Essentially, all treasury bills are discounted securities which are provided at discount to face value.
7. Can you define hedging and preference capital?
Understood simply, hedging may be defined as an instrument to alleviate risks. In other words, hedging may correspond to the essential purpose of insurance. However, what precisely marks the difference between the two is that hedging is not concerned with augmenting profits but alleviating risks.
Preference capital, on the other hand, may be defined as the capital which carries preference over equity capital at the time of the payment of dividend and the winding up of the company.
8. What do you understand by the term composite cost of capital?
Simply put, the weighted average cost of capital is indicative of the composite cost of capital. Such parameters as the debt, preferred stock and common stock are reflected in the eventualities of the composite cost of capital. Essentially, its purpose is to highlight the cost of each additional capital against the backdrop of the average capital cost.
9. What do you mean by the term adjustment entries?
Entries which are passed at the end of each accounting period are known as the adjustment entries. As the name itself suggests, the chief purpose of the adjustment entries is to adjust the nominal and other accounts in order to engender a stable account on the balance sheet. In fact, a balance sheet is an essential component in order to decipher the fairness of a business. In other words, it can also be said that adjustment entries act as drafts before the final entries are passed.
10. What do you understand by the term cost accountancy?
Cost accountancy may be defined as the overall presentation of cost control and other account figures in order to uphold the fairness of a particular venture and to aid the prospects of a grounded managerial decision making. Apart from accounting of the costs, cost accountancy is also concerned with reflecting profitability.