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. 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?
2. 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?
3. 012What does a deferred tax asset actually represent, and when would you write it off?Accounting policy and standardsHardtechnicalBig FourCorporate FP&A

   Say this

   It is a future tax saving you have already recognised in the accounts. It arises when you have paid tax on income you have not yet booked, or booked an expense the tax authority has not yet allowed. You write it down when you can no longer show it is probable you will have taxable profit to use it against.

   Then walk it

   1. The two sources: timing differences, like a provision disallowed until it is paid, and carried-forward losses that you expect to set against future profit.
   2. The recognition test is the whole question. Under Ind AS 12 you recognise a DTA only to the extent that future taxable profit is probable. On a loss-making company that is a forecast, and forecasts are optimistic.
   3. So a large DTA on a company with three years of losses is a soft asset. It converts to value only if the turnaround happens, and it is exactly the asset that gets written off when the turnaround does not.
   4. A number helps: if a company carries 300 crore of DTA and the tax rate is 25 percent, management is implicitly telling you it expects 1,200 crore of taxable profit within the loss carry-forward window. Ask whether that is credible.
   5. For credit work I would strip DTA out of net worth. It cannot be sold, pledged or used to pay a lender, and a write-off hits equity exactly when the company can least afford it.
   6. Deferred tax also explains the gap between effective tax rate and cash tax rate, which is a useful cross-check on earnings quality.

   Where candidates lose it

   Describing the accounting entry and never addressing recoverability. The interesting part is that a DTA is a capitalised forecast. If you do not say it depends on future taxable profits being probable, you have described the bookkeeping and missed the analysis.

   Expect next

   • How would you treat DTA in a net worth covenant?
   • Why do effective and cash tax rates differ?
   • What would make you doubt a DTA on an Indian infrastructure company?
4. 013Give me three practical differences between Ind AS, IFRS and US GAAP that would actually change your numbers.Accounting policy and standardsHardtechnicalBig FourGCC finance centres

   Say this

   Inventory costing, development cost capitalisation and impairment reversals. Ind AS is converged with IFRS, so the real gap is IFRS versus US GAAP, and those three change reported profit and asset values in ways that matter.

   Then walk it

   1. Inventory: US GAAP permits LIFO, IFRS and Ind AS do not. In an inflationary year LIFO reports lower profit and lower inventory, so a US company and an Indian company with identical operations show different margins.
   2. Development costs: IFRS and Ind AS require capitalisation once the criteria are met, US GAAP expenses most research and development as incurred except for specific software rules. That is a direct EBITDA and asset difference for any product company.
   3. Impairment: IFRS and Ind AS allow reversal of a previous impairment if the asset recovers, except for goodwill. US GAAP prohibits reversal. So the same recovery shows up as profit in one framework and nowhere in the other.
   4. Two more worth knowing for an Indian seat: Ind AS carries a few carve-outs from IFRS, for example the treatment of foreign currency monetary item translation differences, so 'converged' is not 'identical'. And Ind AS 115 revenue is essentially IFRS 15, which matters for how Indian IT and construction companies phase revenue.
   5. Practically, in a GCC or KPO seat you often restate an entity from local GAAP to the group's framework. So the useful skill is knowing which three or four adjustments explain most of the gap, not memorising the whole standard.
   6. And the presentation differences trip people up: IFRS allows interest paid in operating or financing, US GAAP fixes it in operating, so the same company has two different operating cash flows.

   Where candidates lose it

   Saying 'Ind AS is the same as IFRS'. It is converged, not identical, and there are named carve-outs. Also, generic answers about 'principles versus rules' score nothing. Name specific standards and say which direction profit moves.

   Expect next

   • How would LIFO versus FIFO change a steel company's margins this year?
   • What is a carve-out you know of in Ind AS?
   • Why does interest classification in cash flow matter for a covenant?
5. 014You have an hour with a set of accounts. What is your earnings quality checklist?Accounting policy and standardsHardcase studyRating agenciesBig Four

   Say this

   Six checks, in this order: cash conversion, receivable and inventory days, the gap between effective and cash tax, related-party transactions, auditor and policy changes, and the size of one-offs. Each one takes minutes and together they catch most of what goes wrong.

   Then walk it

   1. Cash conversion first. Cumulative operating cash flow divided by cumulative EBITDA over three to five years. Below about 70 percent on a mature business and I want an explanation.
   2. Then working capital in days, by line, over five years. Trends, not levels. Receivable days rising while revenue accelerates is the most common early warning in Indian mid-caps.
   3. Then tax. A persistent gap between the effective rate in the P&L and cash tax paid in the cash flow statement means profit is being recognised that the tax authority does not accept yet.
   4. Then related parties. Loans and advances to promoter entities, sales to group companies, royalty payments to the parent. This is where Indian governance failures concentrate, and the note is short enough to read fully.
   5. Then the housekeeping signals: auditor resignation or change, a qualification or emphasis of matter, a change in depreciation life or revenue policy, and any restatement.
   6. Then one-offs, and I would name the limitation in the same breath: add up 'exceptional' items over five years, because if they are exceptional every year they are operating costs with a friendlier label. None of this proves fraud either. It produces a list of questions for management, and the answers are the analysis.

   Where candidates lose it

   Reeling off ratios with no thresholds and no order. A checklist is only useful if you can say what number triggers concern and which check you run first. Cash conversion below 70 percent and rising receivable days are the two that earn their place.

   Expect next

   • Which of those six is the strongest single signal?
   • Walk me through a related-party note you would worry about.
   • How would you handle a company whose auditor just resigned?

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.