TOP FINANCE INTERVIEW QUESTIONS !
Most common accounting interview questions you should expect to see during the recruiting process.
Q. Why do capital expenditures increase assets (PP&E), while other cash outflows, like paying salary, taxes, etc., do not create any asset, and instead instantly create an expense on the income statement that reduces equity via retained earnings?
A: Capital expenditures are capitalized because of the timing of their estimated benefits – the lemonade stand will benefit the firm for many years. The employees’ work, on the other hand, benefits the period in which the wages are generated only and should be expensed then. This is what differentiates an asset from an expense.
Q. Walk me through a cash flow statement.
A. Start with net income, and go line by line through major adjustments (depreciation, changes in working capital, and deferred taxes) to arrive at cash flows from operating activities.
Mention capital expenditures, asset sales, purchase of intangible assets, and purchase/sale of investment securities to arrive at cash flow from investing activities.
Talking About Types of Shops – English Vocabulary
Q. What is working capital?
A: Working capital is defined as current assets minus current liabilities; it tells the financial statement user how much cash is tied up in the business through items such as receivables and inventories and also how much cash is going to be needed to pay off short term obligations in the next 12 months.
Q. Is it possible for a company to show positive cash flows but be in grave trouble?
A: Absolutely. Two examples involve unsustainable improvements in working capital (a company is selling off inventory and delaying payables), and another example involves a lack of revenues going forward in the pipeline.
Q. How is it possible for a company to show positive net income but go bankrupt?
A: Two examples include deterioration of working capital (i.e. increasing accounts receivable, lowering accounts payable), and financial shenanigans.
Q. I buy a piece of equipment, walk me through the impact on the 3 financial statements.
A: Initially, there is no impact (income statement); cash goes down, while PP&E goes up (balance sheet), and the purchase of PP&E is a cash outflow (cash flow statement)
Over the life of the asset: depreciation reduces net income (income statement); PP&E goes down by depreciation, while retained earnings go down (balance sheet); and depreciation is added back (because it is a non-cash expense that reduced net income) in the cash from operations section (cash flow statement).
Q. Why are increases in accounts receivable a cash reduction on the cash flow statement?
A: Since our cash flow statement starts with net income, an increase in accounts receivable is an adjustment to net income to reflect the fact that the company never actually received those funds.
Q. How is the income statement linked to the balance sheet?
A: Net income flows into retained earnings.
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Process Safety Technical Interview Question Answers
How to identify FAKE recruiters?
1. If you see any job posting which shows HIT & LIKE tag.
2. If the recruiter asks to share your contact details.
3. If the recruiter doesn’t keep the official company email Address.
4. If the recruiter asks for money.
5. If the recruiter fails to explain the details of the job.
6. If the recruiter sends you an offer without completing proper interview formalities
Let’s all be cautious while we send our details to someone outside our connections.