The Top Simple Finance Interview Questions and How to Answer Them Like a Pro

Getting hired for a finance role can be challenging. You’ll need to demonstrate your technical skills, business acumen, and ability to communicate complex financial concepts. While finance interviews often involve complex technical questions on accounting, valuation, modeling, and metrics – there are also some deceptively simple questions asked to test your basic knowledge.

In this comprehensive guide, we’ll cover some of the most common simple finance interview questions, provide sample responses, and tips to ace this part of the interview.

Why Did You Choose a Career in Finance?

This question tests your motivation for pursuing finance and how your interests align with the role. The interviewer wants to know why you chose finance over other careers.

Some good responses include:

• You enjoy solving complex numerical problems and analyzing financial data, The constantly changing dynamics keeps you engaged

• You like working with numbers and find satisfaction in helping businesses make sound financial decisions,

• You have a curiosity about business and finance ignited in college and sought diverse internship experiences to gain more exposure.

• You want to keep gaining new skills in finance while working in a dynamic, fast-paced environment. The role aligns with your long-term career goals.

The key is to link your interests with the role’s requirements. Show how you are passionate about finance and how the position fits into your career aspirations

What’s Your Biggest Achievement in Your Finance Career So Far?

With this behavioral question, the interviewer wants to understand your past successes. They are gauging if you can deliver results relevant to the open position.

Some examples of achievements you can highlight:

• Spearheaded a financial analysis project that led to a major new product launch and over $2 million in incremental revenue.

• Developed a complex discounted cash flow model that led to the acquisition of a promising start-up at a favorable valuation.

• Redesigned the budgeting process that reduced errors by 45% and shortened the cycle by two weeks through cross-team collaboration.

• Lead data analysis that identified cost savings opportunities, resulting in a 8% reduction in annual expenses.

Try to quantify your achievement with metrics. Demonstrate how your success positively impacted the business in measurable ways. This showcases your ability to deliver tangible results on the job.

What Are Your Strengths and Weaknesses in Finance?

This question aims to assess your self-awareness about your financial skills. Be honest, but put a positive spin on weaknesses and highlight how you are working to improve them.

Strength examples:

• Strong attention to detail – I double-check my work to minimize errors.

• Ability to simplify complex financial information so executives can easily understand key insights and make decisions.

• Skilled in building detailed financial models from scratch that stand up to rigorous testing.

• Work well under pressure and tight deadlines without compromising quality.

Weakness examples:

• Had difficulty managing multiple stakeholder requests when I first started out. I’ve gotten much better at prioritizing asks and managing expectations through experience.

• Struggled with public speaking early in my career. I’ve put in many hours practicing presentations and volunteering to present analysis which has significantly improved this skill.

• Have an accounting background but less real estate valuation experience. I’ve been reading valuation books, studying sample models, and working with our team’s valuation experts to quickly get up to speed.

The examples above show self-awareness paired with the motivation to improve. This leaves a positive impression on the interviewer.

What Are Some Short-Term Financing Options?

This is a common technical question testing your knowledge of basic corporate finance concepts.

Three good short-term financing options include:

• Line of credit – This provides access to a pre-approved loan amount that the company can draw down as needed. The interest rate is variable based on market rates.

• Accounts receivable financing – The company can sell accounts receivable invoices to a third-party at a discount to immediately access cash tied up in outstanding customer balances.

• Inventory financing – The company pledges inventory as collateral to obtain a loan. As inventory is sold, the loan is paid back. This helps unlock working capital tied up in inventory.

For each option, be prepared to discuss the pros/cons and how interest expense impacts the income statement and cash flow statement differently than equity financing. This level of detail will showcase your understanding of key concepts.

How Do You Stay Up-To-Date on Accounting Standards?

Accounting rules and standards change frequently so this question assesses your ability to keep current in the field. Ways to demonstrate you are on top of new developments include:

• Reading quarterly updates from accounting bodies like the FASB and IASB. Also follow major accounting firms who offer guidance.

• Attending webcasts and conferences covering new accounting pronouncements.

• Participating in training and seminars on new standards offered internally or by external providers.

• Joining industry groups and networking with peers to discuss the implications of new rules.

• Setting Google alerts for new accounting developments and news.

The interviewer wants to see that you have proactively taken steps to keep your accounting knowledge fresh rather than just relying on the minimum company-provided training.

How Would You Explain the Time Value of Money?

This is a common question to assess your ability to clearly communicate fundamental finance principles. The time value of money is the concept that money available today is worth more than the same sum in the future due to its potential earning capacity.

To demonstrate your understanding, you can break it down to the interviewer as follows:

• Given the choice between $100 today or $100 one year from now, a rational person will choose $100 today.

• The $100 today can be invested and earn interest or capital gains over the next year. This increases its value above $100 in one year.

• The discount rate represents the expected return that could be earned by investing the money elsewhere. It can be used to calculate the present value of the future $100 sum based on its earning potential.

• So $100 today is worth more than $100 in one year. This is because of the lost earning potential of receiving the $100 later rather than having it invested today.

Using an easy example shows you can clearly articulate a fundamental finance theory. Be ready to go more in depth if the interviewer asks you to calculate present or future values using formulas.

What Led the 2008 Financial Crisis and How Could It Have Been Prevented?

This tests your understanding of macroeconomics and the causes behind major historical events. Some key factors that led to the 2008 crisis include:

• Lax lending standards and poor risk management around mortgages, especially subprime.

• Securitization and complex financial products that bundled bad loans into difficult to value securities.

• Over leverage with excessive borrowing across consumers, financial institutions and other businesses.

• Regulatory failures and lack of oversight over new financial products like derivatives and credit default swaps.

It could have potentially been prevented by:

• Stricter mortgage underwriting rules requiring sufficient income and assets relative to the loan amount.

• More transparency around mortgage backed securities so investors understood the risk.

• Higher capital reserve requirements for banks and clearer regulations on hedging products like credit default swaps.

• Limiting overly high leverage across the system.

Demonstrating knowledge of this major event reassures the interviewer you understand what can go wrong when proper safeguards aren’t in place. Linking the causes to potential solutions also shows critical thinking skills.

Walk Me Through a DCF Valuation

Being able to walk through a DCF analysis showcases core finance skills. Cover key steps like:

• Project five years of free cash flows based on revenue growth rates, margins, capex projections, and working capital assumptions. Build as much detail into the model as possible.

• Estimate a terminal value using a perpetuity growth formula or exit multiple. Evaluate multiples of comparable public companies.

• Discount the projected free cash flows by the company’s weighted average cost of capital or another appropriate discount rate.

• Sum discounted cash flows and terminal value to estimate equity value. Test varying assumptions in a sensitivity analysis.

• Deduct debt to calculate enterprise value. Compare multiple valuation methodologies as a cross-check.

Clearly explain the reasoning behind each major assumption and calculation. Having a good grasp of valuation methods is crucial for finance roles so expect DCF questions.

How Do You Prioritize Tasks With Competing Deadlines?

This behavioral question tests your time management abilities. Outline your approach:

• Make a list of all upcoming deadlines and tasks without initially assigning priority.

• Label each task high/medium/low importance based on factors like:

  • Overall business impact

  • Stakeholder expectations

  • Events driving the request

• Schedule time to complete high priority items first. Group similar tasks to work on together.

• Communicate with stakeholders on medium/low priorities that may get deferred but keep them updated.

• Bring up any concerns early about capacity to get everything done on time.

The interviewer wants to see that you have