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How to prepare for financial services case interviews
This article was written by Wasim Tahir , a former Oliver Wyman and BCG consultant who has worked in several financial institutions, including Credit Suisse, Lloyds Banking Group, and CDC Group (impact investing). Wasim has coached many candidates for case interviews with firms such as American Express, Capital One, and Credit Suisse.
Case interviews are a long-standing feature of the interview process at both financial institutions and consulting firms that serve financial services clients, like Oliver Wyman .
These employers use case interviews to assess candidates against the same dimensions as the world’s top management consulting firms. However, the content of the cases that they give is very different.
In this article, we explain these differences and provide some guidance on how to prepare.
What’s unique about financial services cases?
Financial services institutions and consulting firms like Oliver Wyman require candidates to demonstrate a solid understanding of the financial services industry. They assess this by using case interviews focused on financial services and by including questions about technical topics such as financial regulations, technology, and financial metrics.
Here are some examples of the kinds of questions you might be asked in a financial services case interview:
- What is the size of the market for credit cards in the UK?
- A leading online trading platform is looking to expand into new geographies. How would you decide which market to enter?
- A major bank is considering entering the cryptocurrency market. How would you evaluate the opportunity and risks involved?
- A bank is planning to launch a new credit card targeted at young professionals. How would you go about deciding the features of the card?
- A regional commercial bank has seen its profitability decline, despite stable revenue. How would you turn the situation around?
- A leading financial services company is looking to grow its personal loan business. How would you help it develop a customer acquisition strategy?
How should you prepare for a financial services case interview?
As a baseline, you should be able to excel in all the dimensions assessed in a case interview . The video lectures in CaseCoach’s Interview Prep Course cover all of these dimensions. The course also includes sample interviews, case material, and practice tools designed to support your preparation.
In addition, you should take the following measures to prepare for financial services interviews specifically:
- Form a helicopter view of how the financial system works in order to fulfill its key objective: intermediating capital.
- Learn about the role that different types of financial institutions and instruments play in the financial system (as shown in the illustration below).
- Understand the operating model of the type of financial institution you’re interviewing for. For example, the operating model of a lender – which will be different to that of a transaction bank or an investment bank – can be broken down into three key areas: underwriting, distribution and collections, and recoveries.
- Know the unique structure of financial statements and the metrics that financial institutions use to measure performance. These include key ratios such as Net Interest Margin and Tier 1 Equity.
- Be aware of the major economic, regulatory, and technological drivers that affect the industry.
Preparing for the assessment dimensions of the case interview and deepening your knowledge of the financial services industry should stand you in excellent stead for succeeding in a financial services case interview.
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Most Common Finance Interview Questions
General finance interview tips, finance interview questions (and answers), additional resources, finance interview questions.
Most common questions (and answers) used to hire for jobs and careers in finance
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:
- Behavioral/fit questions
- Technical questions
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 .
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:
- Take a couple of seconds to plan your answer and repeat the question back to the interviewer out loud (you buy some time by repeating part of the question back at the start of your answer).
- Use a structured approach to answering each question. This typically means organizing answers into points 1, 2, and 3, for example. Be as organized as possible.
- If you don’t know the exact answer, state the things you do know that are relevant (and don’t be afraid to say “I don’t know exactly,” which is much better than guessing or making stuff up).
- Demonstrate your line of reasoning (show that you have a logical thought process and can solve problems, even if you don’t know the exact answer).
Walk me through the three financial statements .
The balance sheet shows a company’s assets, liabilities, and shareholders’ equity (put another way: what it owns, what it owes, and its net worth). The income statement outlines the company’s revenues , expenses, and net income. The cash flow statement shows cash inflows and outflows from three areas: operating activities, investing activities, and financing activities.
If I could use only one statement to review the overall health of a company, which statement would I use, and why?
Cash is king. The statement of cash flows gives a true picture of how much cash the company is generating. Ironically, it often gets the least attention. You can probably pick a different answer for this question, but you need to provide a good justification (e.g., the balance sheet because assets are the true driver of cash flow; or the income statement because it shows the earning power and profitability of a company on a smoothed out accrual basis).
If it were up to you, what would our company’s budgeting process look like?
This is somewhat subjective. A good budget is one that has buy-in from all departments in the company, is realistic yet strives for achievement, has been risk-adjusted to allow for a margin of error, and is tied to the company’s overall strategic plan . In order to achieve this, the budget needs to be an iterative process that includes all departments. It can be zero-based (starting from scratch each time) or building off the previous year, but it depends on what type of business you’re running as to which approach is better. It’s important to have a good budgeting/planning calendar that everyone can follow.
When should a company consider issuing debt instead of equity?
A company should always optimize its capital structure . If it has taxable income, then it can benefit from the tax shield of issuing debt. If the firm has immediately steady cash flows and is able to make the required interest payments , then it may make sense to issue debt if it lowers the company’s weighted average cost of capital .
How do you calculate the WACC?
WACC (stands for weighted average cost of capital) is calculated by taking the percentage of debt to total capital, multiplied by the debt interest rate, multiplied by one minus the effective tax rate, plus the percentage of equity to capital, multiplied by the required return on equity. Learn more in CFI’s free Guide to Understanding WACC .
Which is cheaper, debt or equity?
Debt is cheaper because it is paid before equity and has collateral backing it. Debt ranks ahead of equity on liquidation of the business. There are pros and cons to financing with debt vs. equity that a business needs to consider. It is not automatically better to use debt financing simply because it’s cheaper. A good answer to the question may highlight the tradeoffs if there is any follow-up required. Learn more about the cost of debt and cost of equity .
A company has learned that due to a new accounting rule, it can start capitalizing R&D costs instead of expensing them.
This question has four parts to it:
- What is the impact on the company’s EBITDA ? What is the impact on the company’s net income ? What is the impact on the company’s cash flow ? What is the impact on the company’s valuation ?
- EBITDA increases by the exact amount of R&D expense that is capitalized. Net income increases, and the amount depends on the depreciation method and tax treatment. Cash flow is almost unimpacted — however, cash taxes may be different due to changes in depreciation expense, and therefore cash flow could be slightly different. Valuation is essentially constant — except for the cash taxes impact/timing impact on the net present value (NPV) of cash flows.
What, in your opinion, makes a good financial model?
It’s important to have strong financial modeling principles. Wherever possible, model assumptions (inputs) should be in one place and distinctly colored (bank models typically use blue font for model inputs). Good Excel models also make it easy for users to understand how inputs are translated into outputs. Good models also include error checks to ensure the model is working correctly (e.g., the balance sheet balances, the cash flow calculations are correct, etc.). They contain enough detail, but not too much, and they have a dashboard that clearly displays the key outputs with charts and graphs . For more, check out CFI’s complete guide to financial modeling .
What happens on the income statement if inventory goes up by $10?
Nothing. This is a trick question — only the balance sheet and cash flow statements are impacted by the purchasing of inventory .
What is working capital?
Working capital is typically defined as current assets minus current liabilities. In banking, working capital is normally defined more narrowly as current assets (excluding cash) less current liabilities (excluding interest-bearing debt). Sometimes it’s even more narrowly defined as accounts receivable plus inventory minus accounts payable . By knowing all three of these definitions, you can provide a very thorough answer.
What does negative working capital mean?
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 situations, negative working capital may signal a company is facing financial trouble if it doesn’t have enough cash to pay its current liabilities.
In answer to this interview question, it’s important to consider the company’s normal working capital cycle .
When do you capitalize rather than expense a purchase?
If the purchase will be used in the business for more than one year, it is capitalized and depreciated according to the company’s accounting policies.
How do you record PP&E and why is this important?
There are essentially four areas to consider when accounting for Property, Plant & Equipment (PP&E) on the balance sheet: (I) initial purchase, (II) depreciation, (III) additions ( capital expenditures ), and (IV) 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.
How does an inventory write-down affect the three financial statements?
This is a classic finance interview question. 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 cost of goods sold (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 cash from operating activities , as it’s a non-cash expense (but must not be double-counted in the changes of non-cash working capital). Read more about an inventory write-down .
Why would two companies merge? What major factors drive mergers and acquisitions?
There are many reasons companies go through the M&A process : to achieve synergies (cost savings), enter new markets, gain new technology, eliminate a competitor, and because it’s “accretive” to financial metrics. Learn more about accretion/dilution in M&A .
[Note: Social reasons are important too, but you have to be careful about mentioning them, depending on who you’re interviewing with. These include ego, empire-building, and to justify higher executive compensation.]
If you were CFO of our company, what would keep you up at night?
This is one of the great finance interview questions. Step back and give a high-level overview of the company’s current financial position or the position of companies in that industry in general. Highlight something on each of the three financial statements.
- Income statement : growth rates, margins, and profitability
- Balance sheet : liquidity, capital assets, credit metrics, liquidity ratios, leverage , return on assets ( ROA ), and return on equity ( ROE )
- Cash flow statement : short-term and long-term cash flow profile, any need to raise money or return capital to shareholders
- Non-financial statement : company culture, government regulation, conditions in the capital markets
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