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. 004A company is reporting record profits but its bank balance is falling. Talk me through what you would check.Three statementsIntermediatetechnicalCorporate FP&ARating agencies

   Say this

   I would go straight to the operating cash flow line and compare it with EBITDA. Nine times out of ten the answer is working capital, and the usual culprit is receivables growing faster than revenue.

   Then walk it

   1. First test: EBITDA versus cash from operations. If EBITDA is 200 crore and operating cash flow is 40, the gap is the whole question.
   2. Then decompose the working capital lines as days, not rupees. Receivable days up from 55 to 85 on 20 percent revenue growth means you are funding your customers' balance sheets.
   3. Then check whether the revenue is real. Aggressive percentage-of-completion, channel stuffing near quarter end, or revenue booked on a distributor who has not sold through all show up as receivables that age.
   4. Then look below operating cash flow. Heavy capex, an acquisition, or debt repayment can drain cash while the P&L is fine. That is not an earnings problem, it is a funding problem, and the fix is different.
   5. Finally check the interest and tax lines for cash versus accrual differences, and check whether inventory is building because demand slowed.
   6. The one-line conclusion I would give a CFO: profit is an opinion, cash is a fact, and the bridge between them is days of working capital.

   Where candidates lose it

   Listing every possible cause in no order. Interviewers want a sequence. EBITDA to operating cash flow first, then working capital in days, then revenue recognition, then below-the-line uses. Sequence is the skill being tested.

   Expect next

   • Which working capital line would you fix first and why?
   • How would you spot channel stuffing from published accounts?
   • What would you say to the sales head whose receivables caused it?
2. 005Walk me from EBITDA to free cash flow.Three statementsIntermediatetechnicalCorporate FP&ACorporate finance

   Say this

   EBITDA less cash taxes, less the change in working capital, less capex gives you unlevered free cash flow. Take interest out after that and you have free cash flow to equity.

   Then walk it

   1. Start with EBITDA as a proxy for cash operating profit, then remember it is only a proxy. It ignores tax, working capital and the cost of keeping the assets running.
   2. Tax: the clean way is to tax EBIT, not EBITDA, so you give yourself the depreciation shield. EBIT times one minus the tax rate, then add depreciation back.
   3. Working capital: a growing business consumes cash here. If revenue grows 100 crore and you hold 60 days of net working capital, that is roughly 16 crore of cash gone before you earn a rupee of it.
   4. Capex: split maintenance from growth if you can. Maintenance capex is a genuine cost of staying in business, growth capex is discretionary, and treating them as one number is how people misjudge cash generation.
   5. Unlevered free cash flow is what the business produces for everyone who funded it. Subtract net interest and mandatory debt repayment and you get what is left for equity.
   6. The limitation worth saying out loud: EBITDA is the most abused metric in finance precisely because it sits above all three of those deductions. For a capital-heavy business it flatters everything.

   Where candidates lose it

   Taxing EBITDA instead of EBIT. It overstates the tax bill and understates cash by ignoring the depreciation shield. Also, stating the formula with no number attached makes it sound memorised. Put one figure on the working capital step.

   Expect next

   • Why unlevered rather than levered free cash flow for a valuation?
   • How would you split maintenance from growth capex from published accounts?
   • For which type of business is EBITDA most misleading?
3. 007What is the quality of the revenue? How would you actually judge that for a company you cover?Three statementsIntermediatetechnicalMoody'sCorporate Finance · New York · 2018

   Say this

   Revenue quality is about repeatability, cash conversion and concentration. I would ask three things: does it come back next year without being re-sold, does it turn into cash, and how much of it comes from the top five customers.

   Then walk it

   1. Repeatability first. Contracted or subscription revenue with a renewal rate is worth far more than project revenue re-won every year. For an IT services firm I would look at the share of annuity business versus time-and-material.
   2. Cash conversion. Revenue that sits in receivables for 90 days, or in unbilled revenue for longer, is lower quality than revenue collected in 30. Unbilled revenue growing faster than revenue is a classic warning.
   3. Concentration. If the largest customer is 25 percent of sales, the revenue carries a step-change risk that the growth rate will not show you.
   4. Then pricing versus volume. Growth from price with stable volume tells you there is real pricing power. Growth from discounting into a channel is borrowed from next year.
   5. And the accounting itself. Percentage of completion, gross versus net presentation for a platform, incentives and rebates netted or not, and whether anything material was recognised in the last week of the quarter.
   6. For a rating I would summarise it as: how much of this revenue would still be there next year if nobody made a sales call. That is the number that supports the debt.

   Where candidates lose it

   Treating this as a revenue recognition question only. Quality is commercial before it is accounting. Repeatability, cash conversion and customer concentration are the three levers, and naming concentration is what makes you sound like a credit analyst.

   Expect next

   • How are margins and operating leverage at that company?
   • What would you ask the CFO to prove revenue quality?
   • Which sector has the lowest quality revenue, in your view?

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

4. 008What does deferred revenue tell you about a business, and how do you treat it in a forecast?Three statementsIntermediatetechnicalCorporate FP&ATechnology sector finance

   Say this

   It is cash collected before delivery, so it sits as a liability, not revenue. Growing deferred revenue is one of the best leading indicators you get in published accounts, because it is revenue already banked but not yet recognised.

   Then walk it

   1. Mechanically: cash up, deferred revenue up, nothing on the P&L. As you deliver, the liability unwinds into revenue and the cash flow shows a working capital outflow even though the business is fine.
   2. For forecasting, deferred revenue plus the contracted order book gives you visibility. If a SaaS company has 400 crore of deferred revenue and guides to 900 of revenue, nearly half of next year is already sold.
   3. The direction matters more than the level. Deferred revenue falling while revenue rises means you are recognising a backlog you are not replacing. That is a deceleration you can see two quarters early.
   4. It also funds the business for free. A company with large customer advances is being financed by its customers, which is why negative working capital and deferred revenue usually travel together.
   5. The caveats: it is sensitive to billing frequency, so a shift from annual to monthly invoicing collapses deferred revenue with no change in the business. And multi-year contracts split into current and non-current, so read both.
   6. So I would use it as a cross-check on management guidance, never as the forecast itself.

   Where candidates lose it

   Calling it revenue. It is a liability, and saying otherwise ends the conversation. The other miss is ignoring billing-frequency changes, which is the single most common false signal in deferred revenue analysis.

   Expect next

   • Would you rather own a business with rising or falling deferred revenue?
   • How does deferred revenue behave in a cash flow forecast?
   • What is the difference between deferred revenue and unbilled revenue?
5. 010When should a cost be capitalised rather than expensed, and what does the choice do to the statements?Accounting policy and standardsIntermediatetechnicalBig FourCorporate FP&A

   Say this

   Capitalise when the spend creates a resource that will generate benefits over more than one period and you can measure it reliably. Capitalising flatters current profit and operating cash flow, and pushes the cost into depreciation and into investing cash flow.

   Then walk it

   1. The effect on the P&L: capitalising 100 of spend removes 100 of expense today and replaces it with, say, 20 a year of depreciation for five years. Current EBITDA goes up by the full 100.
   2. The effect on cash flow: the spend moves from operating to investing. Operating cash flow improves by 100 and free cash flow is unchanged. That is why EBITDA and operating cash flow can both be gamed while free cash flow cannot.
   3. The balance sheet gains an asset, so asset turnover falls and return on capital employed falls, which is the honest cost of the choice.
   4. The classic grey area is internally developed software and product development. Ind AS 38 lets you capitalise development once technical feasibility and intention to complete are established, but not research. The line is judgement, and companies sit on different sides of it.
   5. So when I compare two companies I check the policy note first. One capitalising development and one expensing it are not comparable on EBITDA at all, and the fix is to restate both to expensed.
   6. The red flag is capitalised cost growing much faster than revenue, or a sudden policy change with no operational reason.

   Where candidates lose it

   Saying capitalising 'improves cash flow' without specifying which cash flow. It improves operating cash flow and leaves free cash flow untouched. Getting that distinction right is the whole point of the question.

   Expect next

   • How would you adjust two peers with different capitalisation policies?
   • What does capitalisation do to return on capital employed?
   • Would you capitalise cloud migration costs?
6. 011What did Ind AS 116 change about leases, and why does it matter to you as an analyst?Accounting policy and standardsIntermediatetechnicalBig FourRating agencies

   Say this

   It put operating leases on the balance sheet. You now recognise a right-of-use asset and a lease liability, and the rent charge splits into depreciation and interest. EBITDA goes up, debt goes up, and nothing about the economics changed.

   Then walk it

   1. Before: a retailer's store rent was one operating expense line and the commitment sat in a note. After: the present value of the lease payments is a liability and the same amount, broadly, is an asset.
   2. P&L effect: rent disappears from operating expenses, replaced by depreciation on the right-of-use asset and interest on the lease liability. EBITDA rises by the full rent, EBIT is roughly unchanged, and early-year net profit is slightly lower because the interest charge is front-loaded.
   3. Balance sheet effect: reported debt jumps. For an Indian retail or airline company this can be the largest liability on the balance sheet. Net debt to EBITDA changes on both sides of the ratio.
   4. For anyone comparing history, the pre-adoption and post-adoption years are not comparable. Either restate or use a consistent lease-adjusted measure.
   5. Credit analysts were already capitalising leases before the standard, usually at eight times rent, so the standard mostly moved a note into the numbers. What genuinely changed is the covenant arithmetic, and a lot of covenants had to be renegotiated.
   6. The judgement left in it is the discount rate and the treatment of renewal options, and both are levers. A longer assumed lease term inflates both the asset and the liability.

   Where candidates lose it

   Saying EBITDA is unaffected. It rises by the entire rent charge, which is exactly why leverage multiples looked artificially better on adoption. Also mention that pre and post years are not comparable, because that is the practical consequence.

   Expect next

   • How does this change net debt to EBITDA for a retailer?
   • What judgement is left for management under 116?
   • How did credit analysts treat leases before the standard?
7. 016Receivable days went up 10 and payable days came down 10. Which worries you more?Working capital and cashIntermediatetechnicalCorporate FP&ATreasury

   Say this

   They cost the same cash, but receivable days worry me more because that signal comes from your customers, and it usually means either credit quality is deteriorating or you bought revenue with terms. Payable days falling is more often a self-inflicted or supplier-driven choice.

   Then walk it

   1. On the arithmetic they are close to identical. Ten days of cost of sales out of the business either way, so the cash impact does not decide it.
   2. Receivables rising tells you something about demand. Either customers cannot pay, or the sales team extended terms to close the quarter. Both mean the reported revenue is lower quality than it looks.
   3. The test is ageing. If the increase sits in the over-90-day bucket, that is a collection and credit problem heading for a write-off. If it is spread evenly, it is more likely a terms change.
   4. Payables falling has three benign explanations: you took an early-payment discount, you switched to a supplier with tighter terms, or you lost your own credit standing with suppliers. The third one is the dangerous version, and it is a real distress signal.
   5. So my order of investigation is ageing first, then the discount and supplier-terms question, then whether the supplier is demanding advances because of concern about you.
   6. Practically, in an Indian mid-cap I would also check whether receivables sit with government or PSU customers, where 120 days is normal and not a quality signal at all.

   Where candidates lose it

   Treating this as an arithmetic question. The cash effect is the same; the question is about what each movement signals. Say 'receivables, because that signal comes from outside the company', then give the ageing test.

   Expect next

   • How would you read the receivables ageing note?
   • What would make falling payable days a distress signal?
   • How do you handle PSU receivables in a forecast?
8. 017Revenue is 1,200 crore and receivable days go from 60 to 75. How much cash does that cost, and what do you do about it?Working capital and cashIntermediatetechnicalCorporate FP&ATreasury

   Say this

   Roughly 49 crore. Daily revenue is 1,200 divided by 365, about 3.3 crore, times 15 extra days. At a 9 percent borrowing cost that is about 4.4 crore a year of interest for nothing.

   Then walk it

   1. The arithmetic out loud: 1,200 over 365 is 3.29 crore a day. Fifteen days is 49 crore of additional receivables, funded on the working capital line.
   2. Convert it into something a business head cares about. At 9 percent that is 4.4 crore of interest, and on a 10 percent net margin that is equivalent to losing 44 crore of revenue.
   3. Then find out where it is. Split by customer, by geography and by ageing bucket before proposing anything. A single large customer moving to 120-day terms is a different problem from a general slide.
   4. The levers, in order of how quickly they work: stop shipping to accounts beyond terms, tie a part of sales incentive to collection rather than booking, invoice on despatch rather than in a monthly batch, and offer a small early-payment discount where the maths works.
   5. Then the honest trade-off, which is the part that earns the answer: tightening terms can cost volume. So I would model the revenue you are prepared to lose against the 4.4 crore you save, and take that to the sales head as a choice, not an instruction.
   6. And I would put days of receivables on the monthly pack as a standing KPI with an owner, because what gets reported gets managed.

   Where candidates lose it

   Giving the rupee number and stopping. The interviewer wants to see you convert cash into interest cost, then into a business conversation. Also do not propose tightening credit without acknowledging the revenue it can cost.

   Expect next

   • What if the increase is all one customer who is 30 percent of sales?
   • Would you factor the receivables?
   • How would you incentivise the sales team on collections?
9. 018Is negative working capital a good thing or a bad thing?Working capital and cashIntermediatetechnicalCorporate FP&ARating agencies

   Say this

   Usually good, and occasionally the first sign of distress. It means suppliers and customers are funding your operations, so growth generates cash instead of consuming it. It turns bad when it is caused by stretching payables you cannot pay.

   Then walk it

   1. The healthy version: a food retailer or a QSR collects cash at the counter and pays suppliers in 45 days. Grow the store count and cash comes in ahead of the cost. Same for a marketplace holding customer advances.
   2. Why it is valuable: every rupee of growth is self-funded, so return on capital employed is structurally high and the business needs almost no external working capital line.
   3. The distress version looks identical in the ratio. A company that has run out of cash also has payables ballooning, but because it cannot pay them. The difference is whether payables are stretched by contract or by default.
   4. So the test is the quality of the payables. Are terms contractual and consistent, is there an ageing problem, are suppliers demanding advances or letters of credit, and is there a spike in the last month of the year?
   5. The second risk is fragility. A negative working capital business unwinds violently if volumes fall. Sales drop, you stop buying, payables collapse and you have to fund the unwind in cash. That is how a good model kills a company in one bad quarter.
   6. So I would say: excellent while growing, dangerous while shrinking, and always check whether the payables are chosen or forced.

   Where candidates lose it

   Answering 'good' and stopping. The interesting half is the unwind risk when volumes fall and the fact that distress produces the same ratio. Saying both is what makes the answer sound like experience rather than a textbook.

   Expect next

   • How would you distinguish stretched payables from negotiated terms?
   • What happens to that business in a 20 percent volume decline?
   • Which Indian sectors run this model?
10. 019Inventory days jumped from 45 to 70 in one quarter. Diagnose it.Working capital and cashIntermediatecase studyCorporate FP&ABusiness finance

    Say this

    I would split it three ways before saying anything: is it raw material, work in progress or finished goods, is it volume or valuation, and is it demand or supply. Those three cuts almost always identify the cause in an afternoon.

    Then walk it

    1. First the composition. Raw material building is usually a procurement or supply decision. Work in progress building points to a production bottleneck. Finished goods building means you made what you could not sell, and that is the worst of the three.
    2. Then volume versus price. Inventory in rupees can rise because steel prices rose 30 percent with no change in tonnage. Always ask for quantities, because the rupee number alone will mislead you.
    3. Then the denominator. Inventory days uses cost of goods sold, so a sales collapse raises days with no change in stock at all. Check whether the numerator or the denominator moved.
    4. Then the benign explanations: a deliberate pre-buy ahead of a price increase, stocking for a festive season, a new product launch, or a shift to a longer-lead-time import source.
    5. Then the consequences if it is finished goods. Obsolescence and provisioning risk, discounting that damages next quarter's margin, and a cash cost. Twenty-five days on 800 crore of cost of sales is about 55 crore.
    6. My deliverable would be an inventory ageing and slow-moving report by SKU with an owner per category, because the fix is operational and finance's job is to make the cost visible.

    Where candidates lose it

    Jumping straight to 'demand fell'. Half the time it is a price effect or a denominator effect. Ask for quantities and check whether cost of goods sold moved before you diagnose demand.

    Expect next

    • It is all finished goods. What now?
    • How would you set an inventory provisioning policy?
    • What would you put in the monthly pack to stop this recurring?

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.