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Table of contents
1.
Introduction
2.
FP&A Interview Questions for Freshers
2.1.
1. What are the three financial statements?
2.2.
2. Mention the types of charts that are used in evaluation matrices?
2.3.
3. Mention some challenges faced by FP&A?
2.4.
4. Describe components of the cash flow statement?
2.5.
5. What is operating leverage?
2.6.
6. Is ledger and journal similar?
2.7.
7. What are the basic steps in the FP&A process?
2.8.
8. Why does a company requires financial planning?
2.9.
9. Name some modern technologies used in FP&A?
2.10.
10. What are capital structure and goodwill?
2.11.
11. What is Net Present Value?
2.12.
12. What are the various analyzed financial ratios?
2.13.
13. What is the difference between forecasting and budgeting?
2.14.
14. How to create a forecast model?
2.15.
15. What are various valuation techniques?
3.
FP&A Interview Questions for Experienced
3.1.
16. Why PP&E is important?
3.2.
17. What are adjusting entries?
3.3.
18. What are the main cash flow statement categories?
3.4.
19. Explain the expense model. 
3.5.
20. What is cost accountancy?
3.6.
21. What is variance analysis?
3.7.
22. Mention the factors to be considered before investing.
3.8.
23. What are the advantages of raising debt?
3.9.
24. How to calculate the components of the DuPont model?
3.10.
25. What is EBITDA? How to calculate it?
3.11.
26. Explain different types of financial analysis.
3.12.
27. Mention a few financial reporting software.
3.13.
28. What are the two lookup functions and their syntax?
3.14.
29. What are the data formats in Excel?
3.15.
30. What is financial modeling?
4.
Conclusion
Last Updated: May 17, 2024

FP&A Interview Questions

Author Ayushi Goyal
0 upvote

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. 

FP&A Interview Questions and Answers

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. 
  • 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.
  • 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. 
  • 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. 
  • 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. 
  • 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.
  • 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. 
  • 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).
  • 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.
  • 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. 
     
  • 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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FP&A Interview Questions for Experienced

16. Why PP&E is important?

Ans: PP&E stands for Property Plant and Equipment. It provides resources to prepare products for the company. Its value depends on the cost and age. All fixed assets are present with their sale price. These are then listed in the balance sheet at their historical price.
 

17. What are adjusting entries?

Ans. Adjusting entries are journal accounting entries. They convert a company’s accounting records to collect the basics of accounting. Further, you can highlight different adjusting entries, revenue, depreciation expenses, etc. 
 

18. What are the main cash flow statement categories?

Ans: There are three main categories of cash flow statements:

  • Operating cash flow - Gives the estimate of the amount generated by normal business operations of a company.  
  • Financing cash flow - Gives the net cash flow used to fund the company. 
  • Investing cash flow - Gives the evaluation of cash spend or generated in investment activities. 
     

19. Explain the expense model. 

Ans: An optimal report for a specific job provides budget information. It helps in creating a budget. An expense projection model makes this model functional. It helps to identify fixed and dynamic costs. It can help in identifying and calculating the expected profit or loss. 
 

20. What is cost accountancy?

Ans: Cost accountancy helps in making business decisions. It considers both fixed and variable costs. There are four types of cost accounting:

  • Activity-based - Method to identify and assign cost to the activities of all services and products. 
  • Standard costing - Method of evaluating investment required for the production process. 
  • Lean cost accounting - It focuses on providing value to the customers by maintaining workflow and material. 
  • Marginal cost - It is calculated as the change in manufacturing cost divided by the change in produced quantity. 
     

21. What is variance analysis?

Ans: Variance analysis specify the deviation of planned and actual behavior. It can change because of changing market conditions. It is further divided into three categories:

  • Material variance = Gives the difference between the actual and the standard cost of the material.
  • Labor variance = Refers to the number of labor hours used in production. 
  • Overhead variance = Deals with the difference between actual and expected ongoing expenses of an operating business. 
     

22. Mention the factors to be considered before investing.

Ans: Before investing, a company considers these factors:

  • The view of the management.
  • Cash flow budget.
  • The planning of the competitor.
  • Opportunities are created by technological changes.
  • Fiscal Incentives.
  • Market Forecast.
  • Non-economic factors.
     

23. What are the advantages of raising debt?

Ans:  The advantages of raising debt include:

  • It does not affect the ownership of the current owner. 
  • Offers tax benefits to a business. 
  • It is cheaper.
  • Businesses enjoy higher profits even with a minor debt.

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24. How to calculate the components of the DuPont model?

Ans: The main components of the DuPont model are:

  • The asset turnover ratio is equal to net sales divided by average assets.
  • Financial leverage is equal to average assets divided by average equity. 
  • Net profit margin is equal to net income divided by revenue. 
     

25. What is EBITDA? How to calculate it?

Ans:  Earnings Before Interest, Taxes, Depreciation, and Amortization is compressed as EBITDA. It measures the financial performance of a company. EBITDA can be ambiguous as it does not include capital investments. There are two formulas for EBITDA:

# FORMULA 1:

EBITDA= Sum of net income, interest, taxes, depreciation, and amortization. 

# FORMULA 2:

EBITDA= Sum of operating profit, depreciation expense, and amortization expense. 

 

26. Explain different types of financial analysis.

Ans: Financial Analysis is of three types:

  • Liquidity Analysis = Uses a balance sheet to measure the fulfillment of short-term obligations. The acid test, current ratio, and net working capital are used. 
     
  • Vertical Analysis = Checks different components of income statements. Using the result, an enterprise can compare them with other businesses.  
     
  • Leverage Analysis = Evaluates a business's performance. It needs to find the debt/equity ratio. 
     

27. Mention a few financial reporting software.

Ans: Such software helps the company analyze its financial strength. They also keep a check on the KPI (Key Performance Indicator). Some of these types of software are:

  • QuickBooks
  • FinAlyzer
  • Oracle Essbase
  • FactSet
     

28. What are the two lookup functions and their syntax?

Ans: VLOOKUP and HLOOKUP are the two lookup functions. 

  • VLOOKUP (Vertical Lookup). For searching values in a column. Its syntax is = VLOOKUP (lookup_value, table_array, col_index_num, [range_lookup]).
     
  • HLOOKUP (Horizontal Lookup) searches a value in a row and then returns a value from the same column of that value. Its syntax is = HLOOKUP (lookup_value, table_array, row_index_num, [range_lookup]).
     

29. What are the data formats in Excel?

Ans:  For creating financial models, we use various data formats. Some of the data formats are:

  • Numbers -It contains numerical values formatted by separating commas. 
  • Strings - It comprises text format including letters, numbers, and punctuations. 
  • Currencies - These comprise a monetary format available in different currencies. 
     

30. What is financial modeling?

Ans: Financial modeling is for either general corporate finance or asset pricing. It advises the clients to choose the right tools to predict the effects of decisions on the future. Financial modeling performs the following tasks:

  • Strategic planning.
  • Budget planning.
  • Estimate the valuation of any business.
  • Compare competition.
  • Testing different scenarios.
  • Measure the impacts of changes in politics. 

Conclusion

In this article, we have discussed FP&A Interview Questions in detail. We started with a basic introduction to FP&A, followed by FP&A Interview Questions. 

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