Corporate Finance – Finance Technical Interview Questions

  • 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?