Q1
Walk me through how you would build a 3-statement financial model for a company, including assumptions you'd need to validate and how you'd link the income statement, balance sheet, and cash flow statement.
Why they ask this:* Financial modeling is a core competency for analysts. This tests your understanding of interconnected statements, assumption-setting, and ability to create forecasts used in valuation and decision-making.
Q2
Explain the difference between accrual accounting and cash flow accounting. Give an example of when a company might show strong earnings but weak cash flow, and what that signals to you as an analyst.
Why they ask this:* This reveals whether you understand fundamental accounting principles and can interpret financial statements beyond surface metrics. It's critical for identifying red flags in financial health.
Q3
Describe your experience with Excel or financial analysis tools. Walk me through a complex analysis you've performed—what formulas, functions, or techniques did you use, and how did you validate accuracy?
Why they ask this:* Proficiency with spreadsheets and data tools is essential for the role. They're assessing both technical competency and your approach to building error-free, auditable analyses.
Q4
How do you approach variance analysis when actual results deviate significantly from a budget or forecast? What are common root causes you've investigated, and how would you present findings to senior management?