Exam (elaborations) Finance Interview 8901

1. What are the key metrics or factors to consider with regard to potential investments? This question is aimed at helping you to assess an applicant’s basic understanding of what to consider in the process of selecting investments. A sharp candidate will tailor their answer to the specific nature of selecting investments within the business context your company operates in. For example, if interviewing for a job with a private equity firm, then an applicant should mention that one of the factors to consider would be how well the potential new investment fits in with the company’s existing investment portfolio. Other factors a good answer might include are return on investment (ROI), industry trends, and risk tolerance. 2. Why aren’t dividends included on a company’s income statement? With this question you can discover an applicant’s understanding of what dividends are and how they are handled within the context of business financial analysis. The reason the income statement doesn’t list dividends is because they’re not an ordinary, core business operating expense. When dividends are declared, they first appear as a statement of change in the shareholders’ equity. Once they’ve been paid, dividends are recorded in the “financing” section of the statement of cash flows. A really good answer to this question will note all of the above. 3. What’s the best financial metric to use for evaluating a company’s stock price? There’s not one specific right answer to this question. All you’re looking for here is the applicant’s ability to demonstrate that they’re familiar with commonly used financial metrics and that they’re Corporate Finance Institute® able to provide a logical reason for choosing whatever metric they select. For example, an applicant might respond by saying that they favor the Price-Earnings to Growth (PEG) metric because, (A) it is a good indicator of a company’s overall financial health, and (B) it’s superior to the traditional PE metric because it takes into account projected growth. A very good candidate for the job might reveal further knowledge by mentioning one or two alternate metrics that they might consider, depending on the specific stock being evaluated. 4. What’s the effect on the cash flow statement if your business experiences a slowdown in collections of accounts receivables? Accounts receivable are listed as assets on the balance sheet. An increasing figure creates a negative impact on working capital and therefore reduces cash from operations on the cash flow statement. Of course, the practical effect is going to be a reduction in available cash on hand, one that could eventually lead to significant financial and operational problems if, for example, the company doesn’t have enough cash on hand to pay suppliers or creditors when payments are due. A good answer to this question will reflect not only that the applicant knows what the effect on the balance sheet will be, but the potential operating importance of such a slowdown in collecting accounts receivable. 5. What are the most common criticisms that you’ve received regarding your work? This is a question designed to reveal the level of an applicant’s self-awareness and their ability at selfassessment. Their answer can help you in assessing how well they listen to and respond to criticism when it’s received and, beyond that, give you some indication of how seriously they work on trying to improve their performance when shortcomings are pointed out to them. With any employee, you want to be assured that they can handle constructive criticism appropriately – not take it personally or become offended, and instead turn it to their advantage by taking the opportunity to improve their skills. A good answer to this question might note habits such as setting aside time to carefully consider any criticism received and work out a specific plan for improvement. A sharp applicant might relate a specific instance of receiving criticism, making improvements, and then going the extra mile by verifying their improvement with the person who had offered the criticism.