10 Common Finance Interview Questions & Answers [For New Graduates & Professionals] Google

Beginner-Level Finance Interview Questions

1. How can a Company Show Positive Net Income but go Bankrupt?

Ans: By deteriorating working capital (by increasing accounts receivable and decreasing accounts payable) and employing financial strategies, a corporation can maintain a positive net income despite facing bankruptcy.

2. What does Working Capital Mean?

Ans: The amount left over after subtracting current liabilities from current assets is your working capital. It reveals how much cash is locked up in the company’s inventories and accounts receivable, as well as how much cash is required to cover the company’s short-term debt (due within the next 12 months).

3. Why do Capital Expenditures Increase Assets When other Cash Outflows don’t and Instead Create Expenses?

Ans: Because they provide benefits to the company for a sizable period of time, capital expenditures are capitalised. For instance, a new branch will bring in a lot of money for the company for a long period, while an employee’s labour will only be profitable while their salaries are being paid, therefore they incur expenses. The main distinction between a cost and an asset is this.

4. Explain a Cash Flow Statement.

Ans: We begin with net income and work our way down the list, making changes along the way, until we reach cash flows from operations. To calculate cash flow from investments, you must now include capital expenditures, the purchase of intangible assets, the purchase or sale of investment securities, and asset sales. To arrive at finances, you must first calculate the cash flow from investments. Then, you must specify the issuance or buyback of shares and debt, as well as dividend payments.

The entire change in cash must then be calculated by adding the cash flows from investments, operations, and financing. Finally, you can determine the cash balance at the end of the period by using the cash balance at the beginning of the period and the change in cash. Essentially, this is what a cash is.

5. Can a Company Show Positive Cash Flows While Facing Financial Problems?

Ans: Yes, a business can generate positive cash flows despite experiencing financial difficulties by making illogical improvements to working capital (delaying payables and selling inventory), as well as by refusing to allow sales to advance through the pipeline.

Intermediate-Level Finance Interview Questions

1. What is RAROC?

Ans: We analyse risk-adjusted financial performance using a framework called RAROC, which stands for Risk-Adjusted Return On Capital. It provides an accurate picture of organisational profitability. One of the finest methods for figuring out how profitable a bank is. You can use RAROC to more precisely calculate the expected returns by adding it to the risk exposure and the determined economic capital.

2. What do you Mean by Fair Value?

Ans: The term “fair value” describes an objective and logical estimation of the prospective market price of a good, asset, or service. The price at which you can buy or sell an asset in a recent transaction between willing parties that is not a liquidation is the asset’s fair value. The fair value of a liability, on the other hand, is the maximum amount that can be paid or incurred in a current transaction between two consenting parties that is not a liquidation.

3. What do you Mean by the Secondary Market?

Ans: The secondary market is where individuals trade securities that are listed on the stock exchange and have already been made available to the general public in the primary market. The secondary market, usually referred to as the aftermarket, includes the New York Stock Exchange (NYSE), Bombay Stock Exchange (BSE), and NASDAQ.

4. What is the Difference Between Cost Accounting and Costing?

Ans: While cost accounting is a system for analysing a business’s expenses, costing is the process of determining a product’s or service’s cost. A subset of accounting called cost accounting uses cost data analysis and forecasting to identify the costs associated with a project.

Costing, on the other hand, is the process of determining a product’s costs and prices. While costing is a method, cost accounting is an area of accounting. The latter is essential for well-informed decision-making while the former has very little influence on a business’s decision-making.

5. What do you Mean by Cost Accountancy? Do you Know the Objectives of Cost Accountancy?

Ans: Cost accountancy combines costing and cost accounting in order to classify, record, and distribute expenses in order to calculate the cost of a good or service. It gathers and examines pertinent facts, then appropriately presents it to aid in directing decision-making.

Following are the objectives of cost accountancy:

  • To get correct analysis of cost (by process and different elements of cost).
  • To ascertain the cost per unit of various products.
  • To ascertain the profitability of every product.
  • To advise the management on how they can maximize their profits.
  • To disclose the sources of wastage (time, resources, or money).

Advanced-Level Finance Interview Questions

1. What do you Mean by Adjustment Entries? Why do We Pass Them?


Adjustment entries are the transactions we make to the nominal and linked accounts at the conclusion of each accounting period in order to accurately reflect profit and loss in the profit and loss accounts and maintain the balance sheet’s accuracy.

Before we compile the final financial statements, it is essential to pass adjustments because if we don’t, the final statements will represent inaccurate information, causing inaccuracy and misunderstanding. Furthermore, if we don’t approve the adjustment entries, the balance sheet won’t accurately reflect the company’s condition.

2. What do you Mean by the Put Option?

Ans: A put option is a financial market derivative that enables the holder to sell an asset to the put writer at a certain price and on a specific date. Purchasing a put option conveys a bad impression of the stock in question’s future.

3. What do you Mean by Deferred Tax Liability?

Ans: Deferred tax liability is the sum that the business hasn’t yet paid to the tax authority but anticipates doing so in the future. It occurs when a company’s tax expenses are lower than what is shown in its financial statements or tax returns.

4. What is Goodwill?

Ans: Goodwill is an asset that contains the excess of the purchase price over the fair market value of an acquired business.

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

Ans: All transactions are documented in the journal, which is the principal entry book, in order to identify which accounts were debited and which ones were credited. The ledger is the book used to keep separate accounts, though. The journal entries would need to be categorised, then they would need to be added to the designated accounts that are already present in the ledger. The book of final entry is another name for the ledger. 

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