FINANCE INTERVIEW QUESTIONS 1) What is Inventory?

2) Types of ratios 3) what is minority interest

8) what are the first 30 companies in bse and what r the first 50 companies in nse
9) Difference between shares and mutual funds? 10) 11) 12)

What is swaps? ON BSE,some shares are listed as EQ and some as BE, what does it mean? Difference between Equity Capital and Preference capital?

13) What is Book Value? 14) Being the Finance Manger of a company how will you make a financial forecasting? 15) Who is a lame-duck? 16) What is amalgamation? 17) What are Assets?
18)

Did assets generate the liability or liability generate assets?

19) what is put option 20) What is SEBI? 21) What are types of Depreciation?
22)

what are debt instrument and which instrument is preferred by a company for debt financing

23) repo rate

24) 25) 26) 27)

How I can invest money in share market? What is Proposal/Offer? Explain the essential of an acceptance. What is the difference between prepaid expenses and preliminary expenses? what is sensex, nifty and what is difference between those two

28) What is Market Risk? 29) What is nominal account ?

Nikkei stock exchange belongs to which country

31) What is warrant?

How many types of organizations we can establish in India?

33) What is COST Center?

What is the difference between bank rate and repo rate?

35) What are GAAP? 36) What is the difference between Indian GAAP and Accounting Standards. 37) What is GDP??? 38) What is Home Loan Modification?
39)

Define Tax Avoidance? 2. Define Tax Evasion? 3. Define Tax Planning? 4. Define Tax Management? 5. What is the effort to check Tax evasion?

40) how do you tackle a difficult customer 41) What is Shares Split? 42) You've been asked to reduce the budget by 10%. What criteria will you use in identifying the budget reductions? 43) What are the Intangible assets? 44) what is portfolio
45)

What is management?

46) What are Assets?

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47)

What is Merger? What is Acquisition? What are motive behind mergers and acquisitions?

48) What are debentures? 49) What is Dividend Yield Ratio?

What is meant by SBA ( savings bank account) & FD (fixed deposit)?

51) what are the various methods to curb inflation 52) what is the difference between debenture and preference share 53) What are the Types of capital Resources? 54) What will your outlook towards maintenance of liquid assets to ensure that the firm has adequate cash in hands to meet its obligation at all times? 55) What is European Market? 56) What is equity?
57)

If I do MBA Finance ,what kind of job will I get in IT industry and how early

58) What is Forward contract? 59) How one can get success in marketing job ????
60) 61) 62)

Do you think that bonds are preferred by a firm over other debt instruments? Now a days which type of fund is best in share market ? How the BSE Sensex & Nifty Index Calculate & on what basis?

63) What is Liquidity Ratio? 64) What are accounting Principles? 65) What is Petty Cash Book? 66) explain the various sources of finance 67) What is treasury? 68) What is Index? 69) What is net present value?

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70)

Why one rupee note is signed by the ministry of finance? Is governor has the right to sign this note? Is there any interference by the RBI? Whats Derivative?

71)

72) What is AMC?

differentiate capital reserve and reserve capital

74) WHAT IS ACCEPTANCE? EXPLAIN THE ESSENTIALS OF A ACCEPTANCE

differentiate investment and financing decisions

76) what are the methods for issuing of shares in Pakistan 77) What are Current Liabilities? 78) What is Liability?
79)

What do u mean by portfolio management??

80) What are the Intangible assets? 81) DOW stock exchange belong to which country? 82) What is Retained Earnings? 83) What is GDR? 84) What is authorized Capital? 85) What is the difference between asset management and invest management?
86)

What is free float market capitalization?

87) What is merger?

Difference between Cost Accounting and Financial Accounting?

If private company will take over the public company it will come under which type of takeover?

90) WHAT IS RISK MANAGEMENT? 91) what is portfolio 92) Corruption is the price we pay for democracy. Discuss

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93) In what considerations the nifty and sensex value changes? In other words what's the reason for fluctuations in nifty and sensex??? 94) difference between stock and share 95) HIGHLIGHT THE FACTS WHICH LED TO THE FALL OF ENRON ? 96) WHAT IS BOTTOMLINE AND WHAT IS TOPLINE? 97) What is meant by OTC? 98) What are the responsibilities of financial manager?
99) 100)

What a beta is in security marketing?

What is the process for purchasing of anything in a MNC if it is a constructions company.

101) WHAT DO YOU UNDERSTAND BY RESEARCH DESIGN? OUTLINE FORMAL RESEARCH DESIGN. 102) Being the Finance Manger of a company how will you make a financial forecasting? 103)
104)

Briefly explain about Ledger Postings?

What is Reverse Repo Rate, Bank Rate. How do u determine the Price Band of an IPO. How do u fix the Base Price of the IPO. Differentiate between Horizontal and Vertical Merger ? What is Acquisition? Among fixed and floating exchange rates which is the best for India? How? What is the functionality of Stock exchange What is Index? What is Technical Analysis? What are types of Depreciation? What is meant by orbit rage?

105)

106)
107)

108) 109) 110) 111) 112)

Was it the wrong and aggressive use of derivative instruments that led to the financial crisis in the us and the world over?

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114)

What is Preference Capital? What is ROI? What is Bonus Dividends? What is Stock Dividends? What are the Economic Advantages from Merger? What are different types of Dividends? What is exotic option?? And what do you mean by plain vanilla option?

115) 116) 117) 118) 119)

What are the major issues for the financial issues? What are its effects on the Indian economy? What is Interim Dividend?

122)

123) Corporate Social Responsibility is outside the scope of Business houses. Explain why you agree or disagree with this statement 124) 125) 126) 127)
128)

What is the basic difference between P/E ratio and EPS?? What are cash Resources? When will PAT be same as PBT? Does solvency margin in Life Insurance is invested into any funds?

Can I carry Indian currency to other countries and convert it there itself eg:UK,USA? Difference between Cost Accounting and Financial Accounting?

129)

130) WHAT DO YOU UNDERSTAND BY THE TERMCAPITAL GAINS USED IN THE INCOME TAX ACT? WHAT ARE THE RULES REGARDING EXEMPTION OF CAPITAL GAINS. 131) 132) 133) 134)
135)

What is the difference between asset management and invest management? What is Open-Interest and how can we calculate it????? What is Leverage Ratio? What are mutual funds and what are the best funds to buy at this time. Why?? Define optimal capital structure? illustrate with examples:

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136)
137)

What is meant by Lease? What is APEX Banking ? What is the Risk of investment?

138)
139)

What happens to the bank rate during inflation ? (A)kept constant (B) Raised (C) Lowered (D) None of these ECONOMIC VALUE ADDED What is meant by capital market? Why do you want do your specialization in finance? What is meant by Market Capitalization? What is Basel II, is it helpful? What is pay Roll Savings Scheme ?

140) 141)
142)

143) 144) 145)

146) Explain in a sentence or two, each of the elements of a Business Plan and why it is necessary 147)
148)

What is NYSE? Who is the highest salaried employee of India whose salary is 12 Crores/Month? Which is the Biggest Stock Exchange in India? Explain the impact of dividend policy on share price behavior or pattern? What do u mean by capital adequacy ratio? Arbitrage?

149)
150) 151)

152)

153) What do you know about the historical background of Development Financial Institutions (DFIs)? 154)
155)

What is EBITDA?? What is entry load? What is exit load? What is mid Cap? What are Funds Flow Statements? What is ROE?

156) 157) 158)

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159) What is agricultural income & how is agricultural income is totally exempt from tax (ref sec.10(1) of income tax act)? 160) 161) List the objectives of Conglomerate Merger what is the maximum number of directors in public limited company

Liquidity ratios Solvency ratios Activity ratios Profitability ratios

Liquidity ratios

Liquidity ratios measure a businesss ability to cover its obligations, without having to borrow or invest more money in the business. The idea is that there should be sufficient cash and assets that can be readily converted into cash to cover liabilities as they come due. One of the most common liquidity ratios is: Current Ratio = Current Assets / Current Liabilities Current assets basically include cash, short-term investments and marketable securities, accounts receivable, inventory, and prepaid expenses. Current liabilities include accounts payable to vendors and employees, and installments on notes or loans that are due within one year. This ratio could also be seen as a measure of working capital the difference between current assets and current liabilities. A company with a lot of working capital will be in a better position to expand and improve its operations. On the contrary, a company with negative working capital does not have sufficient resources to meet its current obligations, and therefore is not in a position to take advantage of opportunities for growth. Another stringent test of liquidity is the: Acid-test Ratio = Current Assets minus Inventories / Current Liabilities

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Inventory is a current asset that may or may not be quickly converted into cash. This depends on the rate at which inventory is being turned over. By excluding inventory, the acid-test ratio only considers that part of current assets that can be readily converted into cash. This ratio, also called the Quick Ratio, tells how much of the business's short-term debt can be met by using the company's liquid assets at short notice. A ratio that shows how many times inventory is turned over, or sold during the period is: Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory A high turnover ratio is a sign that products are being produced and sold quickly during the period. A ratio of 1.0, for example, would mean that at any given time you have enough inventory on hand to cover sales for the entire period. The higher this ratio, the more quickly inventory is being turned over and producing assets that are more liquid -- accounts receivable and then cash. If you want an even clearer idea of exactly how much ready cash is on hand to cover current liabilities, you can use the: Cash ratio = Cash + Marketable securities / Current Liabilities The cash ratio measures the extent to which a business could quickly cover short-term liabilities, and therefore is of particular interest to short-term creditors. A ratio of 1.0 would indicate that all current liabilities would be covered at any average point in time by cash and marketable securities that could be readily sold and converted to cash. A ratio of less than 1.0 would mean that other assets, such as accounts receivable or inventory, would have to be converted to cash to cover short-term obligations. A ratio of greater than 1.0 means that there is more than enough cash on hand.
Solvency Ratios

Solvency ratios are measures to assess a companys ability to meet its longterm obligations and thereby remain solvent and avoid bankruptcy. Two general, overall solvency ratios include: Solvency Ratio = Total Assets / Total Liabilities and
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Solvency Ratio = Net Worth (Total Capital or Equity) / Total Liabilities These ratios basically tell whether a company owns more than it owes. The higher the ratio, the more solvent the company. Another ratio that can tell how much a company relies on debt to finance its assets is: Debt Ratio = Total Debt / Total Assets Traditionally, both short-term and long-term debts and assets are used in determining this ratio. In general, the lower a companys reliance on debt to finance its assets, the less risky the company. The debt to equity ratio is a measure of a companys leverage how much financing it has in the form of debt as compared with how much it has invested in the business. Debt-equity Ratio = Total Liabilities / Total Owners Equity, or Debt-equity Ratio = Long-Term Liabilities / Total Owners Equity In assessing solvency, it is also important to take into consideration the breakdown of a companys liabilities. Not all liabilities are debt in the form of bank loans or notes payable, for example. There are also accounts payable to vendors, salaries and wages payable, taxes payable, and accrued liabilities, among others. One of the measures of what debt constitutes in terms of total liabilities is: Indebtedness Ratio = Total Debts / Total Liabilities In general, a company that is heavy on debt may be better leveraged, but is also less solvent. The debt repayment terms are another consideration. Short-term debt, payable within one year, may pose a greater burden on cash flow and eventual solvency than long-term debt, which is due beyond one year. A ratio used to quantify this is: Short-term Debt Ratio or Quality of Debt = Short-term Debt / Total Debt

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A lower value for this ratio would indicate less concern for installments coming due within a year. There are other ratios intended to assess a companys capacity to cover its debt repayments and financing costs. One of these ratios measures how interest expense is being covered by the net income the company is generating: Interest expense coverage = Net income before interest and taxes / Interest expense This ratio is also called Number of Times Interest Earned, and represents how many times the net income generated by the company, without considering interest and taxes, covers the total interest charge. The higher the ratio the more solvent the company. Another similar ratio often used to measure a companys capacity to cover its fixed charges is: Ratio of Earnings to Fixed Charges = Earnings before income tax and fixed charges / Interest expense (including capitalized interest) and amortization of bond discount and issue costs Capitalized interest is the amount of interest on a loan to finance a project or acquisition of fixed assets, that has been capitalized and included as part of the cost of the project or asset on the balance sheet. You will probably need to see the notes to the financial statements to find this figure.
Activity Ratios

Many useful gauges of operations can be calculated from data reported in the financial statements. For example, you can determine the average number of days it takes to collect on customer accounts, the average number of days to pay vendors, and how much of the operation is effectively being financed with payment terms extended by vendors. Accounts Receivable Turnover = Total Credit Sales / Average Accounts Receivable This tells you the average duration of accounts receivable for credit sales to customers. This in turn can be expressed in terms of the collection period, as follows:
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Average Collection Period = Days in Year / Accounts Receivable Turnover or Days to Collect = Trade Accounts Receivable / Credit Sales x 365 A similar calculation can be made on the liabilities side, with accounts payable to vendors: Days to Pay = Trade Accounts Payable / Purchases x 365 To determine how much of a companys accounts receivable and inventory are effectively being financed by the credit extended to the company by its vendors: Financing of Trade Accounts Receivable in terms of Trade Accounts Payable = Trade Accounts Payable / Trade Accounts Receivable Financing of Inventory in terms of Trade Accounts Payable = Trade Accounts Payable / Inventory Effectively managing the credit extended by vendors can help a companys cash flow and therefore its liquidity and solvency. From data reported on the income statement, various relationships can be calculated between different expenses and revenues, or a certain type of expense as a percentage of total expenses. Labor Cost Percentage = Payroll and Related Expenses / Total Revenue or Total Expenses Interest Expense Percentage = Interest Expense / Total Revenue or Total Expenses These types of ratios or percentages can be calculated for any item on the income statement. Which accounts are more important will depend on the nature of the business. For example, some operations are more labor intensive and some are more capital intensive. In a labor intensive operation, the percentage that employee-related expenses, including wages, salaries and benefits, represent in terms of total operating expense is relevant. In a capital intensive operation, repairs and maintenance may take on more importance.
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Profitability Ratios

One of the most common profitability ratios is the profit margin. This can be expressed as the gross profit margin or net profit margin, and it can be expressed by company, by sector, by product, or by individual unit. The information reported on the income statement will enable you to determine the overall profit margin. If additional breakdowns are provided, more detailed margins can be calculated. Gross Profit Margin = Gross Income / Total Revenue Net Profit Margin = Net Income / Total Revenue Other commonly used ratios are returns, expressed as return on investment or equity, return on assets, and return on capital employed. These ratios measure a companys ability to use its capital, or its assets, to generate additional value. Return on Investment (ROI) or Return on Owners Equity = Net Income / Average Owners Equity Return on Assets (ROA) = Net Income / Average Total Assets Return on Capital Employed (ROCE) = Net Income Before Interest and Tax / Capital Employed (Total Assets minus Current Liabilities) When evaluating investment opportunities, profits are often measured per share: Earnings per Share = Net Profit After Tax and Dividends / Ordinary Shareholders' Equity Another commonly used ratio to show the yield on an investment is: Dividend Yield Ratio = Dividends per Share / Market Value per Share And, to measure how the price of an investment correlates with the earnings on that investment, you can use the: Price to Earnings Ratio = Market Value per Share / After-Tax Earnings per Share
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