Financial Analyst Interview Questions

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  1. Can you explain why financial reports do not list dividends on the income statement? See answer
  2. What is the best metric to use to analyze a company’s stock? See answer
  3. Which statements (income, balance, cash flow) would you reference to assess the company’s liabilities and assets and why? See answer
  4. What does your financial analysis reporting process involve? See answer
  5. How does increasing accounts receivables impact the company’s balance sheet? See answer
  6. Your client is determined to make a risky investment decision. How do you ensure they maintain safe financial practices? See answer
  7. What are the key factors financial analysts should consider when evaluating prospective investments?
  8. What do you do when you do not have all the information you need to conduct your analysis?
  9. How do you address potentially fraudulent activities in your client’s financial statements? Can you provide an example?
  10. What experience do you have helping clients invest in stock?
  11. How do you maintain up-to-date knowledge of financial analyst practices and investment trends?
  12. What is an example of a profitability model and how do you use it contribute to your analysis?
  13. What software programs do you use to assess financial documents and compile reports?
  14. Can you tell me what EBITDA is and what is left out?
  15. How would you describe your writing skills? Have you ever composed a financial report for a client?
  16. When would you advise a client to raise debt over equity?
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8 Financial Analyst Interview Questions and Answers

What are key factors financial analysts should consider when evaluating prospective investments?

This question assesses the candidate’s financial analysis skills. The applicant’s answer will indicate their financial analysis knowledge and decision-making process. This information is vital because financial analysts must be able to assess the value of investments. Answers can include:

  • Return on Investment
  • Experience of achievement
  • Desire to grow

Example:

“It is crucial to calculate an asset’s return on investment, consider the company’s current portfolio and how the investment fits before recommending a new investment to a client.”

Can you explain why financial reports do not list dividends on the income statement?

The reason for this question is to determine the candidate’s fundamental knowledge of financial information. The answer explains the candidate’s basic understanding of the income statement and financial analysis skills. It is important to know this because financial analysts need an understanding of accounting information, such as the income statement’s line items, to properly evaluate the company’s finances. Answers to look for include:

  • Not firm income
  • Listed under shareholder equity
  • Income statement only contains strong income

Example:

“The income statement does not contain dividends because it shows only the company’s income. If you want to look at the dividends, you will need to look at the shareholder equity section.”

What is the best metric to use to analyze a company’s stock?

This question assesses the candidate’s risk assessment skills. The candidate’s answers show strategy for measuring the stock’s performance, confidence level and ability to present findings using examples and reasoning. It is important to understand this because financial analysts must be able to evaluate risk and reward of various financial investment opportunities. Look for answers such as:

  • Specific metrics
  • Details about the metrics
  • Indications of confidence, such as tone and body language

Example:

“I believe PEG (Price Earnings to Growth Ratio) is an ideal key performance indicator of a company’s stock. In my years of experience in this field, I find it to be the most important metric to assess a business’ financial health. This metric factors in the projected earnings growth for the company and is better than only using the price-earnings ratio.”

Which statements (income, balance, cash flow) would you reference to assess the company’s liabilities and assets and why?

This question evaluates a candidate’s analytical and decision-making skills. The answer shows a candidate’s understanding of financial statements and thought process. It is important to know this information because a financial analyst should understand the ideal statement to reference when analyzing a company’s financial health. Answers to look for include:

  • Balance sheet
  • Income statement
  • Reasons for selections

Example:

“The balance sheet and income statement explain how much assets and liabilities the company has. Alternatively, the cash flow statement will only tell me the inflow of money.”

What does your financial analysis reporting process involve?

Producing reports are an essential part of financial analysts’ jobs because financial analysts provide clients with recommendations based on data from these reports. The question demonstrates the candidate’s critical thinking and organizational skills. A candidate’s answer shows their financial analysis reporting methods, including techniques and tools they use. Look for answers that include information about:

  • Reporting platforms and tools
  • Financial Analysis Report Components
  • Analysis Techniques

Example:

“I like using SAS to produce and thoroughly assess financial reports quickly. The platform ensures I include significant parts of the report, including key risks and the valuation.”

How does increasing accounts receivables impact the company’s balance sheet?

This question tests the candidate’s analytical skills. The answer demonstrates knowledge of how different line items on the balance sheet relate to one another. This information is important to know because it impacts the decisions financial analysts must make. Look for answers, such as:

  • Negative impact on cash flow
  • Lowers company’s net worth
  • Reduces the value of assets

Example:

 “If the company’s account receivables continue to increase it can adversely affect the cash flow, which means the company will not have enough money to operate.”

What do you do when you do not have all the information you need?

This question evaluates the candidate’s research skills. The answer will show the applicant’s approach to finding missing information. It is vital to know this because sometimes information is unknown but needed for creating accurate financial analysis. Look for answers that reveal:

  • Strategic research approaches
  • Software platform use
  • Technical approaches

Example:

“I use SAP to scour information from the client’s transactional history and use the sorting filter to gather the data quickly. I will also contact the customer, if necessary, and use the appropriate information that will help me finish my analysis.”

Your client is determined to make a risky investment decision. How do you ensure they maintain safe financial practices?

Financial analysts help businesses and individuals review their financial health and make smart investment decisions. This question helps interviewers gauge a candidate's experience working as a financial analyst or a related role. It also allows interviewers to determine a candidate's ability to identify potentially risky activities and address them with their clients. A candidate's answer should outline a course of action for speaking with clients and working toward a solution to uphold their finances. The candidate's answer should emphasize:

  • Problem-solving skills
  • Communication skills
  • Financial competency
Here's one potential answer to this question:

Example:

"Whether a client wants to invest in a potentially risky company or a client wants to invest a significant amount of funds despite their current financial limitations, I have an obligation as a financial analyst to ensure they realize the risks involved. I would provide them with financial statements and forecast reports to show them the potential downsides to making a particular investment. Then, I would propose an alternative plan by suggesting they invest in a well-known company or helping them create a plan to pay off debts before starting investments."

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