Finance Technical Interview Questions
|Corporate Finance |
• What could a company do with excess cash on the balance sheet? • What’s the difference between IRR, NPV and Payback?
• What are the impacts on earnings if a company builds a new factory using debt? operating lease? capital lease? cash? • Why would a company repurchase its own stock? What signals (positive & negative) does this send to the market? • When would you take a project with a negative NPV?
• What is Sarbanes Oxley and what are the implications?
• Why might a company choose debt over equity financing, or vice versa? • What are the ways a company can manipulate cash flows?
• What are the primary causes of bankruptcy and what are the options available to a company? • Let’s say that I have a bond with a 5% coupon. What happens to the market price when the prevailing interest rates rise to 8%? How are the coupons affected? • Which corporate bond would have a higher coupon, a AAA or a BBB? What are the annual payments received by the owner of a five year zero coupon bond? • Would you rather have $___ today or $1 a day for the rest of your life? How would you go about valuing this amount? • What happens to a company’s equity when assets rise $1 million and liabilities fall $2 million? • What does it mean when cash flow from operations on a company’s cash flow statement is negative? Is this bad news? If so, is it dangerous? • Suppose that you constructed a pro forma balance sheet for a company and the estimate for external funding required was negative. How would you interpret this result? • How will a decrease in financial leverage affect a company’s cost of equity capital, if at all? How will it affect a company’s equity beta? • If you want to assess the health of a company and you could choose between looking at 3 years of income statements or 3 years of balance sheets, which would you choose and why? • What are some reasons why a company might tap the high yield market? • Finance managers today face many challenges in governance and reporting as a result of recent legislation and events. Given what you know about these recent news events and legislation, what difficulties do you think finance managers are dealing with today?
• What are the different ways to value a company?
• Walk me through a DCF valuation. What is free cash flow and how is it calculated? What would you use for a discount rate? How do you determine the terminal value? • How do you calculate WACC?
• What is the formula for CAPM?
• What is beta? How and why do you unlever a beta?
• What is the current market risk premium? What is the current risk-free rate? • What kinds of multiples do you think are most important when valuing a company and why? What are some reasonable ranges for these multiples? • What makes a good comparable company for valuation purposes? • What is the difference between enterprise value and equity value? • Why should the fair market value of a company be the higher of its liquidation value and its going-concern value? • What is an LBO? Why leverage up a firm?
• Lets say I want to value a natural gas pipeline, how would you suggest I do that? What do you think is the appropriate risk free rate to use with this pipeline? How would you finance buying a pipeline like this? • What do you think an investment banker does?
• As a manufacturing firm, assume you are producing at full capacity. Marketing comes to you with a great new product idea and says the firm needs to begin producing it. What analysis would you do, and what things would you look at in response to marketing’s request?
• Walk me through a typical income statement, balance sheet or cash flow statement. Discuss the inter-relationships between the income statement, balance sheet and cash flow statement. •...
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