The Top Financial Planning and Analysis Interview Questions You Need to Know

Interviewing for a financial planning and analysis (FP&A) role? You can bet you’ll face a barrage of hard-hitting FP&A interview questions designed to test your technical skills, analytical abilities, and business acumen

FP&A roles are crucial for businesses. FP&A professionals help companies track financial performance, forecast future results, model business scenarios, and identify opportunities to maximize growth and cost-efficiency.

Given the high-stakes nature of the role, FP&A interviews are rigorous Hiring managers want to know you have the smarts and strategic thinking needed to drive financial planning and analysis for the business.

In this comprehensive guide, we’ll explore the most common and critical FP&A interview questions along with proven strategies and sample responses to hit out of the park in your next interview:

Walk Me Through the Three Core Financial Statements

This is one of the most fundamental FP&A interview questions. It tests your foundational knowledge of the key financial statements – the income statement, balance sheet, and cash flow statement.

When answering, clearly explain the purpose of each statement and the key components:

• Income statement – Summarizes revenue earned and expenses incurred over a period. Key components are revenue cost of goods sold, operating expenses EBITDA, EBIT, interest, taxes, and net income.

• Balance sheet – Snapshot of assets, liabilities, and equity at a point in time. Key components are assets (current and non-current), liabilities (current and non-current), and shareholders’ equity.

• Cash flow statement – Depicts incoming and outgoing cash flows during a period. Key components are cash from operations, cash from investing, cash from financing, and net change in cash.

Demonstrate your understanding of how the statements interrelate and the insights each provides into the company’s financial health and performance. Explain how analyzing trends across periods offers clues into the business’s growth, profitability, liquidity, leverage, and cash flow.

Concluding with examples from your experience analyzing financial statements is a great way to reinforce your expertise.

How Does an Inventory Write-down Affect the Three Statements?

This FP&A interview question evaluates your grasp of accounting concepts like inventory write-downs and how they flow through the financial statements.

In your response, explain precisely how the write-down impacts each statement:

• On the income statement, it increases the cost of goods sold, lowering gross profit margin for the period.

• On the balance sheet, inventory is reduced by the write-down amount, decreasing current assets.

• The cash flow statement is unaffected since this is a non-cash accounting adjustment.

Elaborate on why companies perform write-downs, such as when inventory becomes obsolete or loses value. Discuss the risks of inaccurate write-downs on the business such as inflated profits or assets. Demonstrate your expertise by articulating the implications across key financial metrics like inventory turnover, gross margin, asset utilization, etc.

How Do You Record PP&E and Why Is This Important?

PP&E (property, plant and equipment) represents substantial capital investments for many businesses. This question tests your knowledge of accounting principles for these long-term assets.

Explain key concepts like:

• PP&E is recorded on the balance sheet at historical cost less accumulated depreciation.
• Depreciation allocates the cost over the asset’s useful life using methods like straight-line or double declining balance.
• Depreciation expense flows through the income statement, impacting net income.
• Capital expenditures represent new PP&E investments recorded as cash outflows on the cash flow statement.

Underscore why proper PP&E accounting matters – it accurately portrays the realizable value of these assets, prevents distorted financials, calculates profitability correctly by matching revenues and expenses, and provides insights into capital allocation strategies.

If You Were CFO, What Would Keep You Up at Night?

This common FP&A interview question examines your ability to think broadly about financial risks and strategic challenges. It demonstrates your capacity to look beyond the numbers to identify vulnerabilities that could impact the company’s financial standing.

In your response, discuss macroeconomic factors like political upheavals, rising interest rates, or commodity price shocks that could hurt revenue growth, profitability, or access to capital. Identify competitive threats that could erode market share. Highlight potential blind spots like cybersecurity risks, supply chain disruptions, or overreliance on a small number of customers.

Your ability to anticipate and articulate financial threats displays strategic thinking skills and a comprehensive understanding of risk management. Describe processes you would establish as CFO to monitor and mitigate these risks. This further reinforces your readiness to take on the highest financial leadership role.

What Does It Take to Be a Great FP&A Analyst?

This common question tests your understanding of the core competencies and responsibilities required for FP&A roles.

Effective responses should highlight both the hard and soft skills crucial for success, including:

Hard skills:

• Expertise in financial modeling, forecasting, and budgeting
• High proficiency in data analysis and tools like Excel
• Strong accounting knowledge
• Strategic thinking and business acumen

Soft skills:

• Communication and storytelling abilities
• Collaboration with cross-functional partners
• Attention to detail and organization
• Analytical problem-solving
• Adaptability to change

Emphasize your well-rounded capabilities spanning numerical proficiency, systems thinking, and interpersonal aptitude. Share an example that encapsulates these skills from your experience. This competency-based response demonstrates you grasp what it takes to excel as an FP&A professional.

How Do You Incorporate Economic Indicators Into Financial Models?

FP&A professionals must keep a keen eye on economic conditions and integrate relevant indicators into their analysis and models. This question reveals your ability to identify and interpret pertinent macroeconomic data.

Discuss how you monitor key indicators like:

• GDP growth
• Interest rates
• Inflation
• Unemployment rates
• Consumer spending

Explain how positive trends in these indicators can predict increases in production, consumer demand, investments, and company valuations. Conversely, worsening economic trends often foreshadow declines in revenue, higher costs, reduced lending activity, or lower stock prices.

Share tools and methods you use to quantify relationships between indicators and financial outcomes, such as regression analysis. Provide examples where applying economic insights enhanced your models and forecast accuracy. This displays your skill in blending external data with financial modeling.

Tell Me About a Time Your Financial Analysis or Model Was Off. What Did You Learn?

Don’t be alarmed by this question – no FP&A professional’s work is perfect! Interviewers want to understand how you react to and learn from errors or faulty assumptions.

Respond honestly about a situation where your analysis or forecast missed the mark. Diagnose the reasons without getting defensive:

• Overly optimistic assumptions
• Lack of access to pertinent data
• Failure to account for an unexpected market event

Then discuss the lessons you drew from this experience and how they improved your approach going forward:

• Enhancing diligence in questioning assumptions
• Broadening data collection and input sources
• Introducing a wider range of scenario modeling

Demonstrate your resilience and commitment to continuous improvement in your FP&A practice. The ability to acknowledge and grow from mistakes is highly valued.

Walk Me Through Your Monthly/Quarterly Forecasting Process

Forecasting is the bread and butter of FP&A. This common question probes your routine process for developing financial projections.

Walk through key steps systematically:

• Collect inputs: Gather historical data, actual year-to-date results vs budget, headcount projections from HR, sales pipeline estimates from sales leaders, operational plans from department heads.

• Identify drivers: Analyze revenue drivers like new products/services, customer retention, market share. Examine expense drivers like salaries, raw materials, facilities, marketing spend.

• Develop assumptions: Research economic trends, consult with business leaders on strategic initiatives, evaluate seasonal or cyclical patterns in the business.

• Build models: Project revenue, costs, and other financial statement components based on historical trends and future assumptions. Conduct sensitivity analysis to stress test assumptions.

• Present forecast: Create visualizations and provide insights into the company’s projected financial performance. Highlight risks, opportunities, and recommendations to support planning.

Your process should demonstrate diligence, collaboration across the business, analytical rigor, and strong presentation skills. These abilities are imperative for an FP&A professional’s success.

How Do You Prioritize Investments as an FP&A Analyst?

FP&A analysts are key advisors on capital allocation decisions. This question probes your experience recommending investment priorities based on financial diligence and strategic alignment.

Discuss your process, including:

• Building detailed financial models to project returns on investments – IRR, NPV, payback periods, breakeven.

• Assessing market conditions for factors like consumer demand, competitive landscape, and economic trends.

• Consulting with business leaders to understand strategic goals and identify high-potential growth opportunities.

• Developing an objective framework to score and rank investment options