Finance Interview Questions and Answers - 2

9. What is Financial Modeling?

A finance model helps the company understand and forecast its financial performance into the future in order to assess its risk and return profile.Finance model is structured around the balance sheet, income statement and the cash flow statement.

A financial model is used in understanding business valuation, preparation of strategic planning. It also helps to allocate resources, etc.

10. What is the use of finance model?

The finance model helps the company to take decisions related to finance like:

i. Equity Capital
ii. Planning and forecasting.
iii. If you need to buy any new assets or make business acquisitions.
iv. Whether you should enter a new market or open a new store, etc.
v. Valuation of business.
vi. Allocation of resources.

11. What have you done to improve your Finance knowledge in the last year?

With this question, the interviewer is trying to understand what activities have you done for self-improvement and self-learning.

To answer this question you can say something like: "I have made a habit to read the financial section of the newspaper daily. I also use a few finance management tools to handle my personal accounts which I plan to use at my workplace to work efficiently.

I also attend seminars which help me with a good exposure and also help me attain more knowledge about the subject."

12. What will be the impact of rise in inventory on Income statement?

Rise in inventory will affect only the Balance sheet and Cash flow statement. The Income Statement will stay unaffected.

13. What is Working Capital?

Working Capital = Current Assets - Current Liabilities

14. What things do you need to consider while accounting for Property, Plant & Equipment?

The important things to consider while accounting for Property, Plant & Equipment (PP&E) on Balance Sheet are:

i.) Initial Purchase
ii.) Depreciation
iii.) Capital Expenditures (Additions)
iv.) Disposition
v.) Revaluation

15. What do you mean by EBITDA?

EBITDA stands for Earnings before Interest, Taxes, Depreciation and Amortization. It helps you understand:

i.) Profitability of a company
ii.) Free cash flow available

16. What do you understand by Enterprise Value?

Enterprise Value means the value of a complete company including debt and equity.

It is the price, someone would pay in case the company gets acquired. No premium is included here.

Enterprise value is a summation of Market value of equity, Debt, Preferred Stock, Minority Interest less the Cash.