Corporate Finance Interview Questions
If you interview in corporate finance, expect some companies to present their questions in the form of business cases or word problems.
Whatever your answer, explain the rationale behind your thinking. Employers are just as interested in your ability to grasp business strategy as they are in your ability to crunch numbers.
Some seemingly ridiculous questions are designed to test your ability to reason, according to Vault.com, which provides articles on career advice in finance, as well as employee surveys at investment banks and other finance employers.
The classic example is "Why aren't manhole covers square?" When you encounter a question like this, experts say you should reason aloud so that the interviewer understands your thought patterns.
Example: "I'm thinking there may be a structural reason they aren't square. Square covers are more time consuming to fit, so a round cover would eliminate the need for exact rotation and therefore reduce man hours and expense."
You might be asked to demonstrate your quantitative skills during an interview. Candidates early in careers might encounter questions about calculating yields-to-maturity. More seasoned candidates might be asked to calculate cost of capital. And everyone dreads questions reminiscent of school math, such as one reportedly encountered in the financial world: "Given a barometer, calculate the height of this building." Every now and then, extreme questions like these do occur. If you hear one, relax. The point isn't to learn your answer; it is to learn how you go about answering.
If you can't do a calculation on the spot, humor can show you can think on your feet. Perhaps you would cleverly tie the barometer to a rope, throw the rope off the building, and then measure the rope. One creative candidate said he would tell the doorman "If you tell me how tall this building is, I'll give you a free barometer."
But try not to appear cocky if you use humor in a finance interview. Finance is still a conservative discipline where people are expected to work their way up in an organization. There's a danger in coming across as too flippant.
Some entry-level corporate finance interview questions from the Vault.com:
- How do you value a corporation?
- When do companies typically buy back stock?
- Why would a company issue stock rather than debt to finance its operations?
- What are some reasons a company would issue debt rather than equity to finance its operations?
- Where did the S&P 500 close yesterday?
- Who is a more senior creditor, a stockholder or a bondholder?
- Explain how a swap works.
Yale's Web site publishes other thought-provoking questions typical of the profession:
- What would you do if you weren't going into this profession?
- What do you know about the culture of this firm vs. other firms?
- What do you think an investment banker actually does on a day-to-day basis?
- How would you go about valuing this department for a hypothetical spin-off?
If you interview for more senior corporate finance titles, expect probing questions on strategy and business philosophy. Experts suggest framing your responses as if you were a strategic partner that the company might want to bring aboard permanently.