Financial Analysis interview preparation

Questions

100

Traced to a firm

42

Firms

28

Updated

September 2026

Asked at

All firmsMoody's7Bain Capital3SSState Street3AMAres Management2BLBlackRock2DED.E. Shaw2MSMorgan Stanley2Oaktree Capital Management2S&P Global2Bridgewater Associates1Citadel1FTFranklin Templeton1Golub Capital1HWHarris Williams1Houlihan Lokey1J.P. Morgan1Jane Street1MWMarshall Wace1Millennium Management1Morningstar1PIMCO1Sycamore Partners1TSTruist Securities1Two Sigma1Vanguard1WMWellington Management1Wells Fargo Securities1Wolverine Trading1

Topic

All topicsThree statements9Accounting policy and standards5Working capital and cash7Ratio analysis8Forecasting and budgeting9Variance and management reporting7Unit economics and costing8Capital budgeting7Cost of capital and valuation7Markets and rates5Modelling, Excel and data8Business partnering6Brainteasers and estimation4Fit and career10

Level

AnyCoreIntermediateHard

Type

AnyTechnicalCaseBrainteaserMarket viewFit

1. 001How are the three statements related and connected?Three statementsCorephone / first roundMoody'sGeneralist · New York · 2022

   Say this

   The P&L shows performance over a period, the balance sheet is a snapshot at a point in time, and the cash flow statement explains how you got from one balance sheet to the next. They join at exactly two places: net income and cash.

   Then walk it

   1. Net income is the bottom of the P&L and the top of the cash flow statement. From there you add back non-cash charges, adjust for working capital, then run investing and financing.
   2. The closing cash number from the cash flow statement is the cash line on the balance sheet. That is link one.
   3. Net income less dividends flows into retained earnings inside equity. That is link two.
   4. So the balance sheet balances because both halves of net income land in it, the cash it generated on the asset side and the earnings it kept on the equity side.
   5. The reason it matters in an FP&A seat is that you cannot forecast one statement alone. If I forecast revenue growth of 20 percent, receivables and inventory move, which changes cash, which changes interest, which changes net income. The three statements are one model.

   Where candidates lose it

   Reciting three definitions and stopping. The word in the question is 'connected'. Say the two linkage points out loud, ending cash onto the balance sheet and net income into retained earnings, or you have not answered it.

   Expect next

   • If you could only see one statement, which would you pick and why?
   • A company is profitable but running out of cash. Where do you look first?
   • Walk me through how 100 rupees of depreciation moves through all three.

   Reported by candidates at Moody's (Generalist, New York, 2022). Source: Wall Street Oasis.

2. 002What are some non-cash items on the cash flow statement?Three statementsCoretechnicalMoody'sProject Finance · New York · 2018

   Say this

   Depreciation and amortisation, share-based compensation, impairments and write-offs, provisions and their movements, deferred tax, unrealised foreign exchange gains and losses, and the equity-accounted share of profit from associates.

   Then walk it

   1. The rule is simple: anything that hit the P&L but did not move cash gets added back or subtracted in the operating section.
   2. D&A is the obvious one, and it is usually the largest. Impairments and write-offs of receivables or inventory are the same idea in one lumpy hit.
   3. Share-based compensation is a real cost to shareholders through dilution but never touches the bank account, so it is added back.
   4. Provisions are worth calling out separately because two things happen: the charge is non-cash when you create it, but the utilisation is real cash later. A clean cash flow statement shows both.
   5. Then the ones people forget. Deferred tax, because book tax and cash tax differ. Unrealised FX on translating a foreign loan. And share of associate profits, which you consolidate one line in the P&L but only receive as a dividend.
   6. The reason a credit analyst cares is that the bigger the gap between EBITDA and operating cash flow, the more the earnings are made of accounting rather than cash.

   Where candidates lose it

   Stopping at depreciation and amortisation. That answer is worth about four seconds. The list is what separates someone who has read a cash flow statement from someone who has built one, so get to provisions, deferred tax and unrealised FX.

   Expect next

   • Which of those would worry you most if it kept growing?
   • How would you test whether a company's earnings convert into cash?
   • Why is a provision charge non-cash but the utilisation cash?

   Reported by candidates at Moody's (Project Finance, New York, 2018). Source: Wall Street Oasis.

3. 003Why do we use accrual accounting at all, if cash is what matters?Three statementsCorephone / first roundCorporate FP&ABig Four

   Say this

   Because cash timing is arbitrary and accrual accounting matches effort to reward in the period it happened. Cash tells you whether you survive. Accrual tells you whether the business works.

   Then walk it

   1. Accrual recognises revenue when you deliver and cost when you consume, regardless of when money moves. That is what makes two periods comparable.
   2. A concrete case: an infra contractor collects a 30 percent advance in March and delivers over 18 months. On a cash basis March looks spectacular and the following year looks terrible. Neither is true.
   3. It also stops management from managing the number by moving a payment date. Paying a supplier on 2 April instead of 31 March changes cash and changes nothing about performance.
   4. The cost of accruals is judgement. Every accrual is an estimate: percentage of completion, useful life, expected credit loss, warranty provision. Judgement is where earnings get managed.
   5. So in practice I would read both. Accrual for the operating story, cash for the truth test. When the gap between them widens for more than two or three quarters, the accrual story is usually the one that is wrong.

   Where candidates lose it

   Answering 'because the standards require it'. That is a rule, not a reason. Name the matching principle and then name its cost, which is estimation judgement, because that is the answer an interviewer remembers.

   Expect next

   • Which accrual would you test first on a manufacturer?
   • Where does accrual accounting mislead you most?
   • What is the cash conversion ratio and what does a low one tell you?
4. 015What is the cash conversion cycle, and what does a long one tell you?Working capital and cashCorephone / first roundCorporate FP&ATreasury

   Say this

   Inventory days plus receivable days minus payable days. It is the number of days between paying for something and being paid for it, and every one of those days has to be funded by debt or equity.

   Then walk it

   1. Inventory days is inventory divided by cost of goods sold times 365. Receivable days uses revenue, payable days uses purchases or cost of goods sold. Use the same basis consistently, because mixing revenue and COGS bases is the most common error.
   2. A worked case: 60 days inventory, 70 days receivables, 40 days payables gives a 90-day cycle. On 1,000 crore of revenue at 20 percent margin, roughly 90 days of cost is about 200 crore of cash permanently tied up.
   3. A long cycle is not automatically bad. A pharma company holding raw material because of regulatory batch testing is different from one holding it because demand fell.
   4. The useful version is the trend and the peer comparison. Ninety days against a peer group at 55 is a competitive disadvantage in funding cost, which is worth real basis points of return on capital.
   5. Negative cycles exist and they are wonderful. A quick-service restaurant or an e-commerce marketplace collects at the till and pays suppliers in 45 days, so growth funds itself.
   6. The limitation: it is built on year-end balances, which for a seasonal business are the least representative day of the year. Use averages or quarterly data where you can.

   Where candidates lose it

   Getting the sign on payables wrong, or mixing bases by using revenue for inventory days. Also, quoting the cycle without converting it into rupees of funding. The number only means something when you say what it costs to carry.

   Expect next

   • Which is worse, receivable days up 10 or payable days down 10?
   • How would you shorten the cycle without damaging sales?
   • Which Indian sectors run negative working capital?
5. 022Walk me through a DuPont analysis.Ratio analysisCorephone / first roundCorporate FP&ARating agencies

   Say this

   DuPont breaks return on equity into net margin times asset turnover times the equity multiplier. Three levers: how much you earn on a sale, how hard you work the assets, and how much of it is borrowed.

   Then walk it

   1. Net income over revenue, times revenue over assets, times assets over equity. The revenue and asset terms cancel, so it is arithmetically just ROE, but each term tells a different operating story.
   2. The five-step version splits margin further into tax burden, interest burden and operating margin. That is the one to use when you want to know whether a margin change came from operations, funding or tax.
   3. The value is in the comparison. Two companies at 18 percent ROE: a branded FMCG business gets there on 15 percent margin and low leverage, a distributor gets there on 2 percent margin and turnover of six times. Same ROE, completely different businesses and completely different risk.
   4. So the diagnostic question is which term is doing the work. ROE held up by the equity multiplier is fragile, because leverage amplifies downturns as neatly as it amplifies returns.
   5. Then the limitations. ROE uses book equity, so a company that has bought back a lot of stock or written off goodwill can show a flattering ROE on a shrunken denominator. And it ignores the cost of equity entirely.
   6. That is why I would pair it with return on capital employed, which is leverage-neutral, and compare the two.

   Where candidates lose it

   Reciting the formula and stopping. The question is a diagnostic tool, so the answer must say which term explains the change and whether the ROE is quality or leverage. Add one comparison of two businesses with the same ROE.

   Expect next

   • Which of the three levers would you push first in a distribution business?
   • Why pair DuPont with ROCE?
   • ROE is 25 percent and rising. When does that worry you?
6. 024What is common-size analysis, and what do you actually look for when you run one?Ratio analysisCorephone / first roundKPO research supportBig Four

   Say this

   You express every P&L line as a percentage of revenue and every balance sheet line as a percentage of total assets. It strips out size so you can compare a 200 crore company with a 20,000 crore one, and compare five years of one company on the same basis.

   Then walk it

   1. On the P&L I read it top down: gross margin, then each cost block as a percentage of sales. What I am looking for is which line moved, not that profit moved.
   2. A live example: operating margin down 150 basis points. Common-sizing shows gross margin held and employee cost went from 12.5 to 14 percent of revenue. Now you have a question for HR, not a vague margin discussion.
   3. On the balance sheet it shows structural shifts: inventory rising as a share of assets, goodwill becoming a third of the balance sheet, the debt-to-total-capital mix drifting.
   4. Trend analysis is the sibling: index everything to a base year at 100 and watch the divergence. Revenue at 160 with receivables at 240 is the story, and neither number alone tells it.
   5. Where it misleads: a revenue denominator that changed because of an accounting reclassification, gross versus net presentation, or a large acquisition mid-year. Then every percentage moves and nothing operational happened.
   6. So common-size gives you the question. The driver analysis behind it gives you the answer, and I would never present one without the other.

   Where candidates lose it

   Defining it and not saying what you look for. The answer has to end in a specific finding, like employee cost up 150 basis points, because that is the output an interviewer wants to see you produce.

   Expect next

   • How would you present this to a business head?
   • What would make a common-size comparison invalid?
   • How do you common-size a balance sheet for a bank?
7. 047What is contribution margin, and why is it not the same as gross margin?Unit economics and costingCorephone / first roundCost accountingCorporate FP&A

   Say this

   Contribution margin is revenue less all variable costs, wherever they sit in the P&L. Gross margin is revenue less cost of goods sold, which is an accounting classification that mixes fixed and variable. They differ because factory overhead is in gross margin and variable selling cost is not.

   Then walk it

   1. Gross margin follows the statutory P&L: cost of goods sold includes direct material, direct labour and absorbed factory overhead, some of which is fixed regardless of volume.
   2. Contribution follows behaviour, not classification. So it excludes factory rent and supervisor salaries, and it includes freight to customer, sales commission, marketplace fees and payment gateway charges, which usually sit in operating expenses.
   3. The gap can be large. An e-commerce brand might report a 55 percent gross margin and have a 22 percent contribution margin once shipping, commission, returns and customer acquisition are counted. The second number is the one that decides whether growth makes money.
   4. You use contribution for any incremental decision: pricing, one-off orders, whether to keep a product line, breakeven, and how much a discount actually costs you. You use gross margin for external comparison, because that is what peers disclose.
   5. The hard part in practice is classifying semi-variable costs. Power, maintenance and a warehouse team are partly fixed and partly volume-driven, and the honest treatment is a high-low or regression split rather than a guess.
   6. One caution: contribution margin only holds over a relevant range. Cross a capacity step and a supposedly fixed cost jumps, so decisions built on contribution have to be checked against capacity.

   Where candidates lose it

   Treating the two as synonyms, or defining contribution as revenue less cost of goods sold. The distinguishing insight is that variable selling costs sit below gross margin, so gross margin overstates the true unit economics of a digital or direct-to-consumer business.

   Expect next

   • Which one would you use to price a one-off export order?
   • How would you split a semi-variable cost?
   • What is contribution margin for a quick-commerce order?
8. 048Walk me through a break-even calculation and tell me where it breaks down.Unit economics and costingCoretechnicalCost accountingCorporate FP&A

   Say this

   Fixed costs divided by contribution per unit gives break-even volume. Divide by the contribution margin ratio instead and you get break-even revenue. It breaks down because fixed costs are only fixed over a range and the product mix never stays constant.

   Then walk it

   1. The arithmetic: fixed costs of 4 crore and contribution of 400 rupees per unit means you break even at 1 lakh units. If contribution is 40 percent of price, break-even revenue is 10 crore.
   2. Add a target profit on top of fixed costs to get the volume needed for a plan, which is how I would actually use it in a budget conversation.
   3. Margin of safety is the useful companion: actual volume less break-even volume as a percentage of actual. At 1.3 lakh units against a 1 lakh break-even, you have 23 percent of headroom, and that is the number a CFO wants in a downturn.
   4. First breakdown: step-fixed costs. Add a second shift or a new warehouse and fixed cost jumps, so there are multiple break-even points, not one.
   5. Second: mix. With ten products at different contribution margins, break-even depends on the blend you sell, so the single-product formula is a simplification that can be badly wrong.
   6. Third: it assumes price is independent of volume, which is exactly false in the situation where you most want to use it, namely deciding whether to cut price to fill capacity. So I treat break-even as a framing device and do the real work with a contribution-by-product model.

   Where candidates lose it

   Dividing fixed cost by gross margin or by price instead of contribution per unit. Also, presenting break-even as if fixed costs are genuinely fixed. Naming step costs and mix is what turns a formula into analysis.

   Expect next

   • What is the margin of safety and why does it matter?
   • How would you handle break-even with ten products?
   • Where would a step-fixed cost sit in a services business?
9. 055Why do managers keep using payback period when we all know it is theoretically weak?Capital budgetingCoretechnicalCorporate financeCorporate FP&A

   Say this

   Because it answers a question NPV does not: how long is my money at risk. It is a liquidity and risk screen dressed up as a return measure, and for a capital-constrained business that is genuinely the binding question.

   Then walk it

   1. Payback is the time until cumulative cash flow turns positive. A 2 crore investment returning 50 lakh a year pays back in four years, and that is it, no discounting.
   2. The two textbook flaws: it ignores the time value of money, and it ignores everything after the payback date. A project that pays back in three years and then stops beats a project that pays back in four and runs for fifteen, which is obviously wrong.
   3. Discounted payback fixes the first flaw and not the second, and it is worth mentioning because it costs nothing to compute once you have the NPV model.
   4. But the reason it survives is real. For a mid-market Indian business funding capex from a cash-flow-constrained balance sheet, a five-year payback may be unaffordable regardless of NPV, because the company cannot carry the funding that long.
   5. It is also a crude proxy for forecast risk. Nobody believes year seven of a forecast, so a rule like 'must pay back in three years' is a way of saying 'only count the cash flows I trust'.
   6. So in a real investment paper I would present NPV as the decision metric, IRR for communication, and payback as a liquidity constraint with a stated threshold. Presenting payback alone is the error; ignoring it is a different error.

   Where candidates lose it

   Dismissing it as naive. The interviewer is testing commercial judgement, not textbook recall. Name the liquidity constraint and the forecast-credibility argument, then position it as a constraint alongside NPV rather than a rival to it.

   Expect next

   • What payback threshold would you set and why?
   • How does discounted payback change things?
   • Which metric would a lender care about most?
10. 061Walk me through WACC and how you would calculate it for an Indian mid-cap.Cost of capital and valuationCoretechnicalCorporate financeKPO research support

    Say this

    Weight the after-tax cost of debt and the cost of equity by their market-value shares of total capital. Cost of equity comes from CAPM: risk-free rate plus beta times the equity risk premium. For an Indian company the two judgement calls are the risk-free rate and the premium.

    Then walk it

    1. The formula: equity over total capital times cost of equity, plus debt over total capital times cost of debt times one minus tax. Use market values for the weights, not book, and target weights rather than today's snapshot if the structure is moving.
    2. Risk-free rate: the ten-year government security yield, matched to the currency of your cash flows. If you are modelling in rupees you use the G-sec, not a Treasury, because the inflation expectation embedded in the two is different.
    3. Beta: take a peer set, unlever each peer's beta using its own debt-to-equity and tax rate, take the median, then relever at your target structure. Do not use a raw regression beta off a thinly traded mid-cap, because it is mostly noise.
    4. Equity risk premium: for India, practitioners typically use something in the 6 to 8 percent range over the G-sec, and the honest position is to state the number you used and show the sensitivity rather than defend a decimal.
    5. Cost of debt: the marginal rate you would borrow at today, not the average historical coupon on legacy loans. For a mid-cap that means the current bank lending rate for its rating, and then times one minus the tax rate for the shield.
    6. Then the caveats worth pre-empting: small companies carry an illiquidity or size premium that CAPM does not capture, WACC assumes a constant capital structure which an LBO or a deleveraging story violates, and a one-point change in WACC can move a DCF value by 15 to 20 percent. So I would always present a WACC range, not a point.

    Where candidates lose it

    Using the historical average cost of debt and book-value weights. Both are wrong: WACC is forward-looking and market-based. Also, quoting a beta straight from a screen for an illiquid mid-cap, rather than unlevering a peer set.

    Expect next

    • Why unlever and relever beta?
    • What equity risk premium would you use for India and why?
    • How would you find the cost of equity for an unlisted company?

Firm tags come from public, anonymous candidate reports on Wall Street Oasis: strong signal, not sworn testimony. Firms are named as the places a question was reported, not as partners of Fin Maverick. Answers are written for this page to show how to think out loud; they are not scripts to recite.