Saturday, May 30, 2009

Common Finance Interview Questions

Since I've gotten these requests, I'll make a quick list of general questions you should definitely be prepared to answer. You should know these regardless of your background (finance / non finance; ivy leage / state school). By the way, these questions were asked by interviewers at bulge bracket banks this past and previousd years to applicants of junior summer analyst positions.
  • Why do you want to work at this firm?
  • Tell me how our firm is different from our competitors.
  • Why are you interested in this position? (Ex: I applied to IBD. I was asked why not Sales and Trading?)
  • There are people with higher GPAs, pregtigious finance experiences, and frankly more potential. Why should I hire you?
  • The most variant questions will be the technical ones. Look at this previous post for an example.
  • There's a good chance you'll get case study questions. These are general situation questions, often based on the interviewer's line of work and current business deals, intended to test your business sense. Some examples:

  1. "An associate asked you to compile the P/E and EV/EBITDA numbers on your first day. He wants it in half an hour. You have no finance background (Interviewee went to a target and majored in religion). How will you get the numbers and be able to explain what they mean?" (Think about what the interviwer is testing)
  2. "An Associate asks you to change a few numbers on the DCF model because they don't seem to make sense. You, as an intern, check the numbers and realize that the numbers are the correct ones. The Associate still asks you to change the numbers to what he wants. How do you respond?"
  3. "If a company with little cash and high debt came to you with a speculative proposition for acquiring a company with a lot of debt, what would your recommendation be?"
  4. A Vice President takes out a balance sheet, income statement, and cash flow statement for Yahoo. She asks: "The current share price is about $21. Is the stock over or undervalued in your opinion?"
In many cases it helps to have studied economics/finance or worked in a bank to answer these questions. However, such a background is not necessary to answer these questions. The bottom line is to know how to answer questions even when you don't know the 'right' answer.

Also, your business intuition is what interviewers are trying to see. If you feel like you don't have the natural intuition to answer these, the good news is that you can develop the business sense if you practice thinking through finance issues and cases.

If you have the answers to these questions, feel free to share them in the comments.


  1. Can you please post what would be good answers to those four case questions above. Thanks.

  2. 1. you should be able to get these numbers off of yahoo finance or bloomberg. Assuming you don't know what a P/E ratio or EBITDA is, I suppose you could look em up on or some other site. Just be resourceful.

    2. Try to explain to associate that the numbers are correct. If he doesn't change his mind, you should talk to someone else on the team (i.e. another associate) since you obviously don't want to have the wrong numbers in your model.

    3. Find another company with less debt on their books. depending on the buyer's debt/equity ratio, they could issue more equity to finance the deal, but debt would not be a good idea, and more equity would dilute the share price. I would recommend paying off some of the debt first and not going after another highly levered company.

    4. Depends on P/E and PEG ratios. you should be able to get net income and # shares outstanding and use that to find EPS and EPS growth to get P/E and PEG. Since PEG accounts for growth, I would use that as a primary indicator, so if PEG > industry avg, then the stock is overvalued and vice versa.

  3. explorer -

    Your responses make good sense and they are a great way to answer the questions. To improve upon them:

    1. Utilize the most valuable resource available to you - the 2nd year analysts. The point is that you need to UNDERSTAND the numbers and to do so you have to work in teams to figure it out.

    2. Your response is reasonable. But, when we received this type of question, it was dealing with integrity and confidence. When someone that is your superior is pushing you to get numbers that simply aren't accurate, it's best that you explain your answers and stand your ground. Associates also make mistakes - and it's your job to make sure the model is right.

    3 and 4: You have the basics right. If you studied finance you should elaborate more. A "good" answer will depend on your finance background.


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