Finance Interview Preparation
Finance Technical Interview Questions
|Corporate Finance |
• What could a company do with excess cash on the balance sheet? • What’s the difference between IRR, NPV and Payback? • What are the impacts on earnings if a company builds a new factory using debt? operating lease? capital lease? cash? • Why would a company repurchase its own stock? What signals (positive & negative) does this send to the market? • When would you take a project with a negative NPV? • What is Sarbanes Oxley and what are the implications? • Why might a company choose debt over equity financing, or vice versa? • What are the ways a company can manipulate cash flows? • What are the primary causes of bankruptcy and what are the options available to a company? • Let’s say that I have a bond with a 5% coupon. What happens to the market price when the prevailing interest rates rise to 8%? How are the coupons affected? • Which corporate bond would have a higher coupon, a AAA or a BBB? What are the annual payments received by the owner of a five year zero coupon bond? • Would you rather have $___ today or $1 a day for the rest of your life? How would you go about valuing this amount? • What happens to a company’s equity when assets rise $1 million and liabilities fall $2 million? • What does it mean when cash flow from operations on a company’s cash flow statement is negative? Is this bad news? If so, is it dangerous? • Suppose that you constructed a pro forma balance sheet for a company and the estimate for external funding required was negative. How would you interpret this result? • How will a decrease in financial leverage affect a company’s cost of equity capital, if at all? How will it affect a company’s equity beta? • If you want to assess the health of a company and you could choose between looking at 3 years of income statements
|Corporate Finance |
• What could a company do with excess cash on the balance sheet? • What’s the difference between IRR, NPV and Payback? • What are the impacts on earnings if a company builds a new factory using debt? operating lease? capital lease? cash? • Why would a company repurchase its own stock? What signals (positive & negative) does this send to the market? • When would you take a project with a negative NPV? • What is Sarbanes Oxley and what are the implications? • Why might a company choose debt over equity financing, or vice versa? • What are the ways a company can manipulate cash flows? • What are the primary causes of bankruptcy and what are the options available to a company? • Let’s say that I have a bond with a 5% coupon. What happens to the market price when the prevailing interest rates rise to 8%? How are the coupons affected? • Which corporate bond would have a higher coupon, a AAA or a BBB? What are the annual payments received by the owner of a five year zero coupon bond? • Would you rather have $___ today or $1 a day for the rest of your life? How would you go about valuing this amount? • What happens to a company’s equity when assets rise $1 million and liabilities fall $2 million? • What does it mean when cash flow from operations on a company’s cash flow statement is negative? Is this bad news? If so, is it dangerous? • Suppose that you constructed a pro forma balance sheet for a company and the estimate for external funding required was negative. How would you interpret this result? • How will a decrease in financial leverage affect a company’s cost of equity capital, if at all? How will it affect a company’s equity beta? • If you want to assess the health of a company and you could choose between looking at 3 years of income statements