- How do I calculate the amount of sales tax that is included in total receipts?
- What is the difference between accounts payable and accounts receivable?
- What is the distinction between debtor and creditor?
- What is owner’s equity?
- What is a capital expenditure versus a revenue expenditure?
Balance Sheet Interview Questions And Answers | Part 1
Looking for an accounting job? Here you will get a complete list of accounting jobs related to Auditing, Corporate accounting, Taxation, Financial investments etc. With the rapid changes in the accounting rules, the demand for professionals who can read the Balance Sheet of a Company is also going up. A Balance Sheet is the most important accounting tool, which helps you to summarize a company’s assets, its liabilities and the shareholders equity at any given point of time. Various financial ratios are obtained from the Balance Sheet and a number of questions can be asked based on these Ratios. It is very stressful to read all the ratios. It can be very confusing to prepare for an interview in which questions asked are related to the Balance Sheet job. Wisdom jobs balance sheet interview questions and answers that will help you to prepare well for this kind of interview are mentioned here:
Q. Walk me through the income statement.
The income statement shows a company’s profitability over a specified period of time by taking its revenue and subtracting out various expenses to arrive at net income.
| Standard Income Statement |
|---|
| Revenue |
| Less: Cost of Goods Sold (COGS) |
| Gross Profit |
| Less: Sales, General, & Administrative (SG&A) |
| Less: Research & Development (R&D) |
| Earnings Before Interest and Taxes (EBIT) |
| Less: Interest Expense |
| Earnings Before Taxes (EBT) |
| Less: Income Tax |
| Net Income |
Most Common Finance Interview Questions
We’ve compiled a list of the most common and frequently asked finance interview questions. If you want to ace your finance interview, then make sure you master the answers to these challenging questions below. This guide is perfect for anyone interviewing for a financial analyst job, and it’s based on real questions asked at global investment banks to make hiring decisions.
In conjunction with this comprehensive guide to finance interview questions (and answers), you may also want to read our guide on how to be a great financial analyst, where we outline “The Analyst Trifecta.”
There are two main categories of finance interview questions you will face:
#1 Behavioral and fit questions relate more to soft skills such as your ability to work with a team, leadership, commitment, creative thinking, and your overall personality type. Being prepared for these types of questions is critical, and the best strategy is to pick 5-7 examples of specific situations from your resume that you can use as examples of leadership, teamwork, a weakness, hard work, problem-solving, etc. To help you tackle this aspect of the interview, we’ve created a separate guide to behavioral interview questions.
#2 Technical questions are related to specific accounting and finance topics. This guide focuses exclusively on technical finance interview questions.
General best-practices for finance interview questions include:
There are essentially four areas to consider when accounting for PP&E on the balance sheet: initial purchase, depreciation, additions (capital expenditures), and dispositions. In addition to these four, you may also have to consider revaluation. For many businesses, PP&E is the main capital asset that generates revenue, profitability, and cash flow.
Negative working capital is common in some industries, such as grocery retail and the restaurant business. For a grocery store, customers pay upfront, inventory moves relatively quickly, but suppliers often give 30 days (or more) credit. This means that the company receives cash from customers before it needs the cash to pay suppliers. Negative working capital is a sign of efficiency in businesses with low inventory and accounts receivable. In other industries, negative working capital may signal a company is facing financial trouble.
Step back and give a high-level overview of the company’s current financial position, or companies in that industry in general. Highlight something on each of the three statements. Income statement: growth, margins, profitability. Balance sheet: liquidity, capital assets, credit metrics, liquidity ratios. Cash flow statement: short-term and long-term cash flow profile, any need to raise money or return capital to shareholders.
The revenue recognition principle dictates the process and timing by which revenue is recorded and recognized as an item in the financial statements based on certain criteria (e.g., transfer of ownership). The matching principle dictates that the timing of expenses be matched to the period in which they are incurred, as opposed to when they are actually paid.
On the balance sheet, the asset account of inventory is reduced by the amount of the write-down, and so is shareholders’ equity. The income statement is hit with an expense in either COGS or a separate line item for the amount of the write-down, reducing net income. On the cash flow statement, the write-down is added back to operating cash flows as it’s a non-cash expense but must not be double-counted in the changes of non-cash working capital.
FAQ
How do you explain balance sheet in interview?
What are the 3 forms of balance sheet?
What are the 3 most important things on a balance sheet?
