Introduction
FP&A stands for Financial Planning & Analysis. It is a set of forecasting, planning, analytical activities, and budgeting. It supports business decisions and the financial health of a company. Corporate FP&A systems collect financial, operational, and external data in one place. The finance team can analyze this data for future plans. Hence FP&A system helps in making profitable decisions.
While appearing for an interview, you will need in-depth knowledge of Interview Questions.
This article will cover some of the crucial questions asked in FP&A interviews. The aim is to get you comfortable with the most important questions. So that you sail through the interview.
FP&A Interview Questions for Freshers
1. What are the three financial statements?
Ans: The three financial statements used as a measure by the company are:
- Income statement.
- Statement of cash flows.
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Balance sheet.
2. Mention the types of charts that are used in evaluation matrices?
Ans: The following types of charts are:
- Line charts that help in daily movement tracking.
- Bar charts that help in periodic highs and stock price tracking.
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Point chart that helps in finding stock momentums.
3. Mention some challenges faced by FP&A?
Ans: Some of the top challenges faced in FP&A are:
- Disconnected processes and systems.
- Time-consuming.
- Inaccurate forecasting and budgeting.
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Less collaboration.
4. Describe components of the cash flow statement?
Ans: The cash flow statement consists of three main components. These are:
- Cash flow from operation.
- Cash flow from investing.
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Cash flow from finance.
5. What is operating leverage?
Ans: Operating leverage is a formula for cost accounting. It measures the strength as an upward trend of growth. It helps you to extend your business.
6. Is ledger and journal similar?
Ans: No, ledger and journal are not the same. The journal records all the financial transactions of the first time. While the ledger has only a particular account from the journal. So, journals are the raw books that help in preparing the ledger.
7. What are the basic steps in the FP&A process?
Ans: The basic steps include:
- Data collection, verification & combination.
- Forecasting & Planning.
- Budgeting.
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Performance analysis and monitoring.
8. Why does a company requires financial planning?
Ans: The company requires financial planning as it provides benefits like:
- Cash flow management.
- Budget allocation.
- Risk mitigation.
- Management of crisis.
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Create a smooth roadmap.
9. Name some modern technologies used in FP&A?
Ans: Some of the modern technologies are changing the game. By making financial analytics more powerful and plans, forecasts, and budgets more accurate. These are:
- Cloud.
- AI/ML(Artificial Intelligence and Machine Learning).
- Automation tools.
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Collaboration tools.
10. What are capital structure and goodwill?
Ans: The capital structure indicates how much money a company uses. To grow and operate, they can spend to receive, save, and borrow. Goodwill is a strength for an over-priced business purchased.
11. What is Net Present Value?
Ans: NPV stands for Net Present Value. It is the difference between the present value of cash inflows and outflows. Budgeting uses NPV to analyze the profitability of an investment or project.
12. What are the various analyzed financial ratios?
Ans: Various financial ratios are:
- Liquidity.
- Solvency.
- Efficiency.
- P/E(Price Earning).
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Dividend.
13. What is the difference between forecasting and budgeting?
Ans: A budget contains the plan a business wants to achieve. While a forecast states its result expectations in a summarized format.
14. How to create a forecast model?
Ans: The steps for creating a forecast model are:
- Create or choose a template.
- Select products included in the model.
- Calculate expected revenue.
- Create a tracking system.
- Align your team.
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Use tools to make processing easier.
15. What are various valuation techniques?
Ans: The following three types of valuation techniques are:
-
DCF analysis – Helps in forecasting future cash flows.
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Precedent transactions – Helps in identifying the transactional values. Here company compares a business with another business that has been selling recently.
- Comparable company analysis – Helps in comparing the current worth of business. It compares one business to other similar businesses using EBITDA(Earning Before Interest, Taxes, Depreciation, and Amortization).
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