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. 054NPV and IRR disagree on which project to pick. Which do you follow, and why does IRR mislead?Capital budgetingIntermediatetechnicalCorporate financeCorporate FP&A

   Say this

   Always NPV. It measures value created in rupees at your actual cost of capital. IRR is a rate, and a rate tells you nothing about size, assumes you can reinvest every interim cash flow at that same rate, and can have more than one solution or none.

   Then walk it

   1. The scale problem: a project returning 60 percent on 10 lakh creates 6 lakh of value. One returning 18 percent on 5 crore creates far more. IRR ranks the first higher and shareholders prefer the second.
   2. The reinvestment assumption: IRR implicitly assumes every interim cash flow is reinvested at the IRR itself. If the project shows 35 percent and your genuine reinvestment opportunity is 12, the 35 percent is fiction.
   3. The timing problem: IRR favours projects that return cash early, which systematically disadvantages long-dated infrastructure or R&D projects that create more total value.
   4. The mathematical problem: a project with alternating cash flow signs, such as a mine with a large end-of-life restoration cost, can have two IRRs or none. NPV always has exactly one answer.
   5. And it ignores the cost of capital except as a hurdle. Two projects at 20 percent IRR are not equivalent if one is a domestic capacity expansion and the other is a greenfield in a new country with a different risk profile.
   6. Where IRR is genuinely useful is communication. Business heads and boards think in rates, and comparing a rate against the cost of capital is intuitive. So I would present both, decide on NPV, and use MIRR if the reinvestment distortion is large.

   Where candidates lose it

   Saying IRR is wrong without naming the mechanism. You need the reinvestment assumption and the scale problem specifically. Also do not dismiss IRR entirely, because every real investment committee uses it and saying so shows commercial sense.

   Expect next

   • How does MIRR fix the reinvestment problem?
   • When would you get two IRRs?
   • How would you rank projects under a fixed capital budget?
2. 057Which cash flows belong in a capital budgeting decision, and which do not?Capital budgetingIntermediatetechnicalCorporate financeCorporate FP&A

   Say this

   Only incremental after-tax cash flows. That means include opportunity costs, working capital, tax effects and terminal value, and exclude sunk costs, allocated overhead that does not change, and financing costs, because those sit in the discount rate.

   Then walk it

   1. The test for every line is: does this cash flow exist only because we do the project? The feasibility study you already paid for is sunk and irrelevant, however much it cost and however much the sponsor wants it counted.
   2. Include the opportunity cost of resources you already own. Using a vacant plot the company holds is not free; the relevant cost is what you would otherwise get for it. This is the most commonly missed item in real investment papers.
   3. Include working capital. A capacity expansion needs inventory and receivables from day one, and you get them back at the end. On a 100 crore project a 15 crore working capital build can move the NPV materially.
   4. Include tax properly: depreciation is not a cash flow but its tax shield is, so add it back and tax the operating profit. And do not forget the tax on any terminal-value asset sale.
   5. Exclude interest and principal. Financing is captured in the WACC, so putting debt service into the cash flows double-counts it. Candidates do this constantly and it makes every project look worse.
   6. Exclude allocated corporate overhead unless it genuinely increases. A share of the head office rent is an accounting allocation, not an incremental cost, and including it kills projects that should be approved.

   Where candidates lose it

   Including interest in the cash flows while also discounting at WACC. That is double counting and it is the single most common error in capital budgeting questions. The other classic is treating a sunk feasibility cost as relevant.

   Expect next

   • How do you handle the vacant land the company already owns?
   • Where does the working capital release go?
   • What if the project cannibalises an existing product?
3. 059What is better: a one rupee increase in EBITDA or a one rupee decrease in debt?Capital budgetingIntermediatetechnicalAMAres ManagementPrivate Equity · New York · 2026

   Say this

   The EBITDA rupee, as long as it is recurring, because it is capitalised at the multiple. At eight times EBITDA, one rupee of extra EBITDA adds eight rupees of enterprise value and therefore eight of equity value. One rupee less debt adds exactly one rupee of equity value.

   Then walk it

   1. The arithmetic: equity value equals EBITDA times the multiple, less net debt. Differentiate on each term. A rupee of EBITDA is worth the multiple; a rupee of debt repayment is worth one, rupee for rupee.
   2. So at any multiple above one times, which is every real business, EBITDA wins on value. At eight times it wins eight to one.
   3. But the answer depends on the word recurring. A one-off rupee of EBITDA is worth one rupee, not eight, and the whole question is whether a buyer will capitalise it. That is why sponsors fight over which addbacks are run-rate.
   4. Then the cases where debt reduction wins. If you are close to a covenant breach, the rupee that keeps you compliant is worth far more than its face value, because a breach can cost you the company. Same if you are facing a refinancing wall in a shut credit market.
   5. There is also a second-order effect in favour of EBITDA: higher EBITDA lowers leverage on the same debt, which can reduce the interest margin on a ratchet and improve the rating. So EBITDA improves both terms and debt repayment improves only one.
   6. So my answer is EBITDA, by the multiple, with the caveat that it has to be recurring and that liquidity risk trumps value arithmetic when you are near a covenant.

   Where candidates lose it

   Answering 'they are the same, one rupee is one rupee'. The point is that EBITDA is capitalised and debt repayment is not. But an answer with no caveat is also weak: near a covenant breach, deleveraging genuinely wins.

   Expect next

   • At what multiple would you be indifferent?
   • What if the EBITDA improvement is a one-off?
   • How does a leverage ratchet change your answer?

   Reported by candidates at Ares Management (Private Equity, New York, 2026). Source: Wall Street Oasis.

4. 060Lease it or buy it. How do you decide?Capital budgetingIntermediatetechnicalCorporate financeTreasury

   Say this

   It is a financing decision, not an investment one, so first settle whether the asset is worth having at all. Then compare the after-tax cash flows of buying, including the depreciation shield and the residual value, against the after-tax lease payments, discounted at your after-tax cost of debt.

   Then walk it

   1. Separate the two questions. Whether to have the machine is an NPV question at WACC. How to fund it is a lease-versus-borrow question, and because both alternatives are contractual and low-risk, you discount at the after-tax cost of debt, not WACC.
   2. Buy case cash flows: the purchase outflow, the tax shield on depreciation each year, maintenance and insurance you now bear, and the residual value after tax at the end.
   3. Lease case cash flows: the rentals, fully tax-deductible as they are paid, usually with maintenance included in an operating lease, and no residual value because you never owned it.
   4. The net advantage to leasing is the difference in present values. In practice leasing wins where the lessor has a better tax position than you, where the asset obsoletes fast so you want the residual risk transferred, or where you cannot access the debt to buy it.
   5. For an Indian company two specifics matter: whether you can use the depreciation shield at all, because a loss-making or MAT-paying company cannot, and the GST treatment, since input credit on the asset purchase versus on the rentals affects the cash timing.
   6. And since Ind AS 116 the accounting difference has largely gone, both routes put an asset and a liability on the balance sheet. So decide on cash and tax, not on how it will look in the ratios, and say that explicitly if someone argues for leasing to keep debt off the balance sheet.

   Where candidates lose it

   Discounting at WACC. This is a debt-equivalent comparison, so the after-tax cost of debt is the right rate. The second trap is arguing for leasing to keep the liability off the balance sheet, which Ind AS 116 has ended.

   Expect next

   • What if the company is loss-making?
   • Why does the lessor's tax position matter?
   • Does Ind AS 116 change the economics or just the presentation?

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.