Interviewing for a corporate finance role? You can bet you’ll face some tough questions designed to test your knowledge and thought process. But with the right preparation, you can walk into that interview room feeling cool calm, and collected.
In this comprehensive guide, we’ll explore some of the most common corporate finance interview questions, examples of the best responses, and tips for crafting answers that impress.
Why Corporate Finance Interview Questions Matter
Corporate finance interviews typically feature two main types of questions behavioral/fit and technical
Behavioral questions evaluate your soft skills, like teamwork, communication, and problem-solving. Technical questions test your finance knowledge and ability to think on your feet.
Both categories allow hiring managers to assess your qualifications and determine if you’d thrive in the role. So it’s crucial to ready yourself and practice responses that highlight your skills.
With preparation, you can show up to the interview fully equipped to nail even the toughest questions.
Top 5 Corporate Finance Interview Questions and Answers
Let’s look at examples of popular corporate finance interview questions recruiters may ask and how to craft strong responses:
1. Walk me through the three main financial statements. What does each convey?
This is one of the most common questions for assessing basic financial knowledge. A strong answer will demonstrate you understand the core purpose and interconnectivity of the financial statements.
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The balance sheet shows a company’s assets, liabilities, and shareholders’ equity at a single point in time. It provides insights into liquidity, leverage, working capital, and capital structure.
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The income statement outlines revenues, expenses, and profit/loss over a period of time. It offers visibility into profitability, growth trends, and operating performance.
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The cash flow statement records cash inflows and outflows from operating, investing, and financing activities. It provides insights into liquidity and the company’s sources and uses of cash.
2. How would you calculate a company’s weighted average cost of capital (WACC)?
This tests your ability to analyze cost of capital – a key concept in corporate finance. A good response will demonstrate you can practically apply WACC:
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WACC is calculated by taking the percentage of debt in the capital structure multiplied by the cost of debt, plus the percentage of equity multiplied by the cost of equity.
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The formula is: WACC = (D/V x Rd) + (E/V x Re)
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Where D is market value of debt, V is total capital (debt + equity), Rd is pre-tax cost of debt, E is market value of equity, and Re is cost of equity.
3. What are the pros and cons of financing with debt versus equity?
This evaluates your understanding of capital structure analysis. The answer should weigh the basic tradeoffs of debt and equity:
Pros of debt:
- Cheaper cost since interest is tax deductible
- Higher returns for shareholders if profitable projects are funded
Cons of debt:
- Required interest payments increase risk
- Too much debt can constrain liquidity and operating flexibility
Pros of equity:
- No required payments or covenants
- Dilution of ownership/control is lower
Cons of equity:
- More expensive cost since dividends don’t get tax shield
- Shareholder dilution from new equity issuance
4. How would an increase in R&D spending affect the financial statements?
This type of question tests your grasp of accounting treatment and impact on the financial statements.
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Income statement – R&D is expensed, so increasing R&D raises expenses and lowers net income in the current period.
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Cash flow statement – R&D is a non-cash expense, so the higher R&D spending is added back in cash from operations. Overall cash flow impact is minimal.
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Balance sheet – No direct impact, but lower earnings reduce retained earnings over time.
5. If you were CFO, what financial areas would keep you up at night?
This behavioral question reveals your ability to take a step back and quickly identify risks and priorities.
As CFO, I would be most concerned with:
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Profitability trends – Is revenue growing at a healthy rate? Are margins within target ranges?
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Liquidity – Does the company have enough cash reserves and working capital to fund operations and growth?
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Credit health – Are leverage ratios within limits required by debt covenants?
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Growth investments – Does the company have access to capital to fund high-return growth opportunities?
General Tips for Answering Corporate Finance Interview Questions
Beyond practicing responses to specific questions, following some general best practices can help you craft impressive answers:
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Listen carefully and repeat part of the question back to ensure understanding before responding. This also buys you time to collect your thoughts.
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Structure your thoughts into an organized, logical response. Lead with the most important points first.
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Speak confidently to demonstrate your capabilities. It’s fine to say you don’t know the exact answer as long as you explain your thought process.
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Use examples from your experience whenever possible to illustrate concepts. This makes your understanding tangible.
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Ask clarifying questions if you need a question repeated or more context before responding. Don’t be afraid to take control of the conversation.
Prepare for Success in Your Corporate Finance Interview
With the right preparation, you can tackle any curveballs thrown your way in a corporate finance interview. Follow these tips to get ready:
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Research the company’s financials and identify strengths, weaknesses, opportunities, and threats.
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Brush up on key concepts like the financial statements, valuation, cost of capital, working capital, M&A, sensitivity analysis, and understanding KPIs.
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Use your resume as a guide for anticipating behavioral questions. Identify accomplishments and struggles you can use in examples.
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Review lists of popular technical and behavioral questions online and practice responses aloud.
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Reflect on why you want the role and how your skills would add value. Let your passion and motivation shine through.
Landing the corporate finance job you want takes dedication and practice. But ultimately, your hard work preparing for the tough questions will pay off in interview success. Now get out there and crush it!
General Finance Interview Tips
There are two main categories of finance interview questions you will face:
- Behavioral/fit questions
- Technical questions
The behavioral and fit questions are more about your personality type and soft skills like your ability to work with others, your leadership, your dedication, your creative thinking, and your ability to lead others. It is important to be ready for these kinds of questions. The best way to do this is to choose five to seven specific situations from your resume that you can use to show leadership, teamwork, a weakness, hard work, problem-solving, etc. To help you tackle this aspect of the interview, we’ve created a separate guide to behavioral interview questions.
Technical questions are related to specific accounting and finance topics. This guide focuses exclusively on technical finance interview questions.
General best practices for finance interview questions include:
- Wait a second to think of an answer, then repeat the question aloud to the interviewer. If you need more time, repeat part of the question at the beginning of your answer.
- Use a structured approach to answering each question. Usually, this means putting answers into groups of three, like 1, 2, and 3. Be as organized as possible.
- Don’t be afraid to say “I don’t know exactly,” because that’s much better than guessing or making stuff up. If you don’t know the exact answer, say what you do know that is important.
- Display your line of thought (show that you can think logically and solve problems, even if you don’t know the exact answer)
Most Common Finance Interview Questions
We’ve compiled a list of the most common and frequently asked finance interview questions. If you want to do well in your finance interview, make sure you know how to answer these tough questions. This guide is great for people who are interviewing for jobs as financial analysts. It’s based on real questions that global investment banks use to hire people.
This is a complete list of finance interview questions and answers. You may also want to read our guide on how to be a great financial analyst, where we talk about “The Analyst Trifecta.” ”.
Top 20 Corporate Finance Interview Questions You Must Know!
FAQ
What are the three basic questions of corporate finance?
Why corporate finance questions?
