24. What are the best practices for financial modeling?
The financial analysts are experts in using MS Excel; they follow a few structuring and organizing techniques which make them stand out at financial modeling. Here are a few best structuring practices that the analysts use:
i.) The analysts do not prepare separate sheets. They build 3 statement model in one worksheet.
ii.) They use color to differentiate between formulas and inputs.
iii.) In order to give important information, they make use of charts, graphs, and tables.
iv.) They prepare separate assumptions section.
v.) In order to differentiate between the sections, they make proper headers and subheads.
vi.) If there is a need to explain any assumption, they use the cell comment function.
vii.) In order to ensure the balance sheet balances, they build in error checks.
viii.) They refrain themselves from giving unnecessary circular references.
ix.) They also refrain from linking other excel sheet unless it is required.
25. What skills are required by an Analyst to be able to make a good financial model?
In order to be a pro at financial modeling here are a few skills that the financial analyst needs to possess. They are as follows:
i.)
Accounting Skills: He/she needs to have an excellent understanding of accounting fundamentals. He/she should have the ability to read financial statements, break them and then be able to build them again. He/she must know how certain concepts works like depreciation, amortization, revenue recognition, etc.
ii.)
Excellent MS Excel Skills: He/she should be able to use MS Excel effortlessly. They should know all the formulas and various MS Excel functions to do a proper analysis. This is one of the most important skills that an analyst should possess.
iii.)
Ability to link the three financial statements: You must know how to link the balance sheet, income statement and cash flow statement in the Excel together.
iv.)
Problem- solving skills: The analyst should be able to identify the problem and solve it in a very organized manner.
v.)
Forecasting Skills: An analyst needs to have the ability to predict future from the historical results.
vi.)
Attention to detail: In order to prepare a good financial model you will have to keep in mind to give attention to even the minutest detail so that you do not miss out any important information.
vii.)
Ability to make complex information simple: He/she should have the ability to break complex information in a simple easy to understand format.
viii.)
Design and presentation skills: A good model should be easy to follow and should have neat formatting, graphs, and tables. Also, the analyst should have the skills to present the model in a very interactive way.
26. What is financial reporting and what is its purpose?
Financial reporting refers to the process of providing information about the company's performance over a specific period of time to the management and to the public. These reports are prepared and are issued on a quarterly or annual basis.
Depending on the company's objectives and strategies financial reporting helps management to take effective decisions. It helps the management to identify the company's strengths and weaknesses. It gives you the ability to understand the company's overall financial health. The report keeps all the stakeholders informed about the progress of the company and also ensures that the company is following government regulations.
27. Can you tell us about your most successful project?
To answer this question you would have to look at your work experience and think about the project which was successful. The interviewer would like to know how you contributed to the project. Also, before going for the interview read the job description and about the company carefully to understand which project the interviewer would be more interested in.
To answer this question you can say something like: "While working with one of the start-ups recently I helped them with their revenue distribution and expense projections. I had gathered the information about their monthly requirement of resources from their vendors which helped me with the projections. I prepared a written report informing all the stakeholders. This projection helped the company to expand its operations successfully before than they had expected."
28. How is communication an important skill for a financial analyst?
Effective communication ability is a very important skill for an analyst. In order to be successful, a financial analyst needs to develop collaborative and effective work relationship with people in the organization. These people help the analyst with the information they need for financial analysis. Hence, a financial analyst needs to have the ability to communicate in a clear manner.
Most of the time communication skills act as a deciding factor in the hiring process when the interviewer is evaluating two candidates with the same technical skills.An analyst with good communication skills has more chances of being selected as the role involves a lot of interaction and good presentation skills.
