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10 Most Frequently Asked Corporate Finance Interview Questions & Their Best Answers!

Nov 3, 2022 | 7 minutes |

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A career in corporate finance allows you to be at the heart of how a corporation runs and grows. It is the function that helps the organizations arrange funds for the expansion, acquisition, and sales of businesses. If you enjoy working with numbers and possess good analytical skills, this field is for you. Now, you’ll most probably be clueless about what are the questions that are asked in Corporate Finance job interviews and how you should prepare for such interviews! In this article, there are 10 frequently asked Corporate Finance interview questions (both basic & advanced) and their answers that you should prepare for before your interviews. AltUni’s Certificate Program in Corporate Finance not only helps you learn key concepts but with AltUni Career Services, it enables you to create a profile that will get you more shortlists and develop soft skills and interview skills that will ensure you ace those interviews!

Apply Now To Learn From Industry Experts & Work On A Live Project With Credence Consultants!

Here are 10 frequently asked Corporate Finance interview questions:

1. What is a financial statement & what are the four types of financial statements? Financial statements are written reports that provide an overview of a company’s financial position over a certain period. 2. What is capital budgeting? A company's capital budgeting process determines which proposed fixed asset purchases it should approve and which to reject. The amount of money involved in a fixed asset investment might be so huge that if the venture fails, the company could go bankrupt. As a result, capital budgeting is an important requirement for major fixed asset proposals. 3. How is WACC calculated? Weighted Average Cost of Capital(WACC) represents an average rate of returns to shareholders and uses company debts and equity. WACC Formula = [Cost of Equity * % of Equity] + [Cost of Debt * % of Debt * (1-Tax Rate)] 4. Explain how a swap works. A swap is a financial arrangement in which one of the two parties commits to provide a series of payments regularly in return for receiving another set of payments from the other side. The purpose of a swap is to convert one type of payment scheme into another that is more suited to the objectives of the participants, which might be retail clients, investors, or major corporations. 5. How is a merger different from an acquisition? Merger: It is the consolidation of two or more companies to form a joint business entity. The companies that are merged are of equal stature. Acquisition: It is the process of one company taking control over the other. The company that acquires holds the power of freedom and decision-making of the acquired company. 6. What is EPS? How is it calculated? Earnings Per Share(EPS) is a financial measure, calculated by dividing net earnings accessible to common shareholders by the average number of outstanding shares during a certain period.EPS = (Net Income – Preferred Dividends) / Weighted Average Shares Outstanding The EPS formula measures a company's ability to yield net profits for common shareholders. 7. Why do companies need a valuation? What are the three different methods of valuation? Business Valuation is essential to grow, raise funds, financial funds, build strategies and sell or acquire a business. Three methods for valuing a company: 8. What is financial modeling? Why is it useful? A financial model is a means that displays prospective financial outcomes under various scenarios to assist individuals in making important financial decisions.  It is important for decision-making around mergers and acquisitions, risk minimization, fund, and requirement strategy, raising capital, selling assets, business valuation, and business growth. 9. Difference between equity and debt financing? The long-term finance process of raising funds by selling the company's shares to the general public is referred to as equity financing. The ownership rights are given to financers. The short-term finance process by which a corporation raises funds by selling debt instruments to investors is known as debt financing. It is an obligation to the company. 10. What is NPV? How is it calculated? Net Present Value (NPV) is the value of all future cash flows (inflow and outflow) generated against the initial investment. NPV = Cashflow^ n / (1+Discount Rate)^ n  “n” - periodic cash flow It is used to assess the value of an investment, a project, or any sequence of cash flows.
Now that you are familiar with the kind of Corporate Finance interview questions that are frequently asked in job interviews, let’s also look at how you can learn concepts in-depth with a Live project & crack your next interview.

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“Connecting with people from diverse backgrounds with such diverse experiences broadened my horizons and deepened my understanding of the subject.” - Pragati Bub “The classes and the expert sessions conducted were really good as we gained real-world experience and knowledge from experienced people in the world of Finance.” - Abhishek Somana “It was amazing and enlightening…gained confidence towards understanding Financial concepts (accounting, financial evaluation, technical analysis, and M&A deals).” - Ashish Dhami

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