What are key factors financial analysts should consider when evaluating prospective investments?

This question assesses the candidate's financial analysis skills. The applicant's answer will indicate their
financial analysis knowledge and decision-making process. This information is vital because financial
analysts must be able to assess the value of investments. Answers can include:

Return on Investment

Experience of achievement

Desire to grow

"It is crucial to calculate an asset's return on investment, consider the company's current portfolio and
how the investment fits before recommending a new investment to a client."

Can you explain why financial reports do not list dividends on the income statement?

The reason for this question is to determine the candidate's fundamental knowledge of financial
information. The answer explains the candidate's basic understanding of the income statement and
financial analysis skills. It is important to know this because financial analysts need an understanding of
accounting information, such as the income statement's line items, to properly evaluate the company's
finances. Answers to look for include:

Not firm income

Listed under shareholder equity

Income statement only contains strong income

"The income statement does not contain dividends because it shows only the company's income. If you
want to look at the dividends, you will need to look at the shareholder equity section."

What is the best metric to use to analyze a company's stock?

This question assesses the candidate's risk assessment skills. The candidate's answers show strategy for
measuring the stock's performance, confidence level and ability to present findings using examples and
reasoning. It is important to understand this because financial analysts must be able to evaluate risk and
reward of various financial investment opportunities. Look for answers such as:

Specific metrics

Details about the metrics

Indications of confidence, such as tone and body language

"I believe PEG (Price Earnings to Growth Ratio) is an ideal key performance indicator of a company's
stock. In my years of experience in this field, I find it to be the most important metric to assess a
business' financial health. This metric factors in the projected earnings growth for the company and is
better than only using the price-earnings ratio."

Which statements (income, balance, cash flow) would you reference to assess the company's liabilities
and assets and why?

This question evaluates a candidate's analytical and decision-making skills. The answer shows a
candidate's understanding of financial statements and thought process. It is important to know this
information because a financial analyst should understand the ideal statement to reference when
analyzing a company's financial health. Answers to look for include:

Balance sheet

Income statement

Reasons for selections

"The balance sheet and income statement explain how much assets and liabilities the company has.
Alternatively, the cash flow statement will only tell me the inflow of money."

What does your financial analysis reporting process involve?

Producing reports are an essential part of financial analysts' jobs because financial analysts provide
clients with recommendations based on data from these reports. The question demonstrates the
candidate's critical thinking and organizational skills. A candidate's answer shows their financial analysis
reporting methods, including techniques and tools they use. Look for answers that include information
about:

Reporting platforms and tools

Financial Analysis Report Components

Analysis Techniques

"I like using SAS to produce and thoroughly assess financial reports quickly. The platform ensures I
include significant parts of the report, including key risks and the valuation."

How does increasing accounts receivables impact the company's balance sheet?
This question tests the candidate's analytical skills. The answer demonstrates knowledge of how
different line items on the balance sheet relate to one another. This information is important to know
because it impacts the decisions financial analysts must make. Look for answers, such as:

Negative impact on cash flow

Lowers company's net worth

Reduces the value of assets

"If the company's account receivables continue to increase it can adversely affect the cash flow, which
means the company will not have enough money to operate."

What do you do when you do not have all the information you need?

This question evaluates the candidate's research skills. The answer will show the applicant's approach to
finding missing information. It is vital to know this because sometimes information is unknown but
needed for creating accurate financial analysis. Look for answers that reveal:

Strategic research approaches

Software platform use

Technical approaches

"I use SAP to scour information from the client's transactional history and use the sorting filter to gather
the data quickly. I will also contact the customer, if necessary, and use the appropriate information that
will help me finish my analysis."