Q: What is a Financial Analyst?
A: The financial analyst position is one of the money making position in a financial sector. It is one of the crucial position in any industry or organization. Now let us see the roles and responsibilities
Q: What does a Financial Analyst do?
A: The role of financial analysts is to audit or inspect the economy. Along with this, they also assist the industries and companies to decide in investment decisions for banks, corporations, investment firms and insurance companies.
They are said to be the title for many chore responsibilities which can be budgeting, accounting, or cost analysis.
The main aspect required to attend a financial analyst interview is to present your skills in analyzing the economic conditions and understanding the basic financial analysis.
Q: Explain financial modeling?
A: The usual practice in conducting a financial analysis is called financial modeling. It can also be mentioned as a quantitative analysis which is mainly utilized for asset pricing or for general corporate finance.
The important aspect of financial modeling is that hypothetical variables are utilized in the formula so that the impact on economic conditions, profitability, and market behavior can be determined.
It is always advisable to present your answers with an example. You can mention that financial modeling can be used to find out the jet fuel cost for airlines for the annual rise of 5% in crude oil for future years.
Q: Which ratios do you calculate for financial modeling?
A: For example:
Liquidity ratios like Current Ratio, Quick Ratio, and Cash Ratio
Return on Equity
Return on Assets
Turnover Ratios like Inventory Turnover Ratios, Receivables Turnover ratio, Payables Turnover Ratio
Margins – Gross, Operating, and Net
Debt to Equity Ratio
Q: Explain quarterly forecasting, expense models and updating revenue?
The analysis of expenses and revenue which is predicted to be produced or incurred in future is called quarterly forecasting.
The product or the service and its respect and demand in the market are mentioned as revenues.
At times when it is mentioned that revenues would boom, it means that profits will enhance and also the expenses would elevate when compared with incomes.
Q: What is the difference between journal entry and a ledger?
The book which has the original entry is called a journal. The book is mandatory one as it has all the transactions that associate to the company for the specific financial year.
The journal can also be mentioned as the mother of the ledger. In this scenario, all the accounts are portioned as debit and credit as per rules.
The ledger is one which has particular accounts which is taken from the original journal.
Q: What is the difference between p&l account and income and expenditure statement?
A: Business concerns who desire to earn profits by functioning business are ones who use profit and loss account.
In the same manner, trusts, non-profit organizations make use of income and expenditure statement. It is the trading organizations that prepare P&L account in order to find out the net profit or loss of the organization’s operation.
Non-trading organizations prepare income and expenditure account, to find out if they have made a profit to run their business further or is in a loss.
Q: Let’s say that i have bought new equipment. how it would affect 3 financial statements.
A: In the beginning, there would be no impact on the income statement.
In the balance sheet, cash will go down and PP&E (Property, Plant & Equipment) would go up.
In the cash flow statement, the purchase of PP&E would be treated as cash outflow (cash flow from Investments).
After few years, there will be wear & tear of the PP&E, so the company needs to deduct depreciation in the income statement which will also result in less net income.
In the balance sheet, retained earnings will get reduced.
And in the cash flow statement, the depreciation will be added back as a non-cash expense in the “cash flow from operations”.