Last updated on June 18th, 2025 at 10:49 am

If you are currently preparing for Financial modelling Interview Questions, then you are at the right place! Finance interviews are often mis-understood, due to the jargons used. This might lead you to think, “I need to prepare for this job and that job specifically”. The reality is far from this, in fact I will break this down for you, so that you exactly know, the goal. Also I will share the High probability financial Modelling interview questions also for different roles and specific company in this discussion.
I have analysed close to 10,000 Financial Modelling Interview Questions, from various source including a large chunk through our own placement services that we provide at Mentor Me’s financial modeling program. We can safely break down, the interviewing approach into Fundamental and job specific
Job Specific means, additional basic awareness of domain. For example in a FP&A job interview, interviewer expect to know how to organise data and create insights on financial performance. It would be very different for a equity research job, where the interest might be in common sense approach to research. Here are top financial modelling interview questions which you will most likely face which also includes role and company specific financial modelling interview questions.
General Financial Modeling Interview Questions
Income statement, Balance sheet and cash flow statement. Performance, status till date, and performance in cash.
Hence the Income statement basically runs on the philosophy of Revenue-Expenses= Profit.
Just as profit links to retained earnings, various other line items also link to the balance sheet. For example, cost of goods sold affects inventory
The cash flow on the other hand is like a reconciliation of Income statement to cash by using the changes in balance sheet items
For example: 5 items sold worth $10, but the buyer would be you in the future then $50 gets booked in revenue ( basis the accrual system of accounting). However in cash flow statement you need to be convert revenue into cash.
So we take the $50 and find what changed in accounts receivable(credit sales). Hence if the credit sales in the previous year was $10 and in the current year is $60. That means the change is $-50. So the cash revenue =$50(Income statement)- ( $10-$50) change in accounts receivable
Operating, financial u0026 investing activities of the business.
Free cash flow means, cash of business which is surplus after taking into consideration all the business activities.
The cash flow have two perspectives generally. Are you a debt investor or an equity investor.
If it’s a debt investor then the cash flow that is relevant is the cash before repayment of principal and interest
If its an equity investor then the cash flow that is relevant is the cash after interest. Those are the basic principles to start with.
FCFF = EBIT * (1 – Tax Rate) + Depreciation u0026 Amortization – Capital Expenditures – Change in Working Capital
FCFE = Net Income + Depreciation u0026 Amortization – Capital Expenditures – Change in Working Capital + Net Borrowing
Bankers won’t let you through unless you’ve paid their interest and principal. The interest is already deducted in net income, if it was accrued it gets adjusted through changes in working capital. What’s left is the cash available to equity investors.
We divide revenue recognition are into regular and special cases.
Special cases include percentage completion method, cost recovery method, and completed contract method.
Methods like these are used in cases like Construction real estate companies. Since usually the acquisition, construction and sale of real estate projects can take multiple years. The revenue is recognized basis the percentage of the completion of the project. This is an aggressive method of revenue recognition.
Completed contract method: In this method no revenue is recognized until all the construction is completed. This is the most conservative method
Cost recovery method- In this method, revenue is recognized up to the costs incurred during the profit. Resulting in zero profit. This method is used usually in case of instalment sales.
Majorly there are three types of finance namely, Investment finance, corporate finance and private finance.
This question is a very common question, and usually the interviewer is seeking to understand your interest. For example; when I was first asked this question, my direct answer was that I was curious about stocks since high school where I used to check scrips going up and down. From there my exploration lead me to study finance.
Excel Related Financial Modeling Interview Questions
Sensitivity analysis can be done using the data table function in the Data Ribboonu003e What if Analysis u003e Data table Data table is an array function. A Data table can be created by creating 2 x 2 Matrix of the assumptions to be tested. For example in a very basic table, we could test the interest rate u0026 tax rate effect on profitability. Hence in the 2 x 2 Matrix interest rate and tax rate become the rows and col. To the side of the matrix we need to link the original profit calculation, which tells excel that this is the calculation which needs to be replicated by changing the two assumptions. Its important to note, that this won’t work unless your calculation and model is linked and no hard coding is done.
V look up or vertical look up function u0026 Index match are both used to find the related data, basis some field data point you have.
If you check the above data set, the data firstly flows from top to down i.e vertical. Hence vlook up gets used. Second we take customer number(3604-2407), as the source of finding profit.
So vlook up function asks for three things. Look up value – 3604-2407
Table array- the place where you are looking.Difference between the two functions. Table array needs to be selected to make sure the source data col, is to the left most side of the selection, followed by the numeric index position of the finding data. The third column is where the profit lies.
While with index and match removes this constraint and you don’t have the constraint of left most side selection.
A typical question to test, whether you understand how calculations actually work on excel.
Circular reference is basically an error caused when a calculation is performed linking its self.
In fact a lot of models would be difficult to calculate if it wasn’t for circular calculation feature of excel. Let me give you an example: Lets say you took a loan $100 with interest rate of 5% compounded annually. However you can’t pay the interest for 3 years. So what would would be the loan accrued until 3 years.
What is a Debt Schedule in financial modeling?
A debt schedule is a detailed plan that outlines a company’s debt obligations, including principal repayments, interest payments, and the timing of these payments. It is a critical component in financial models as it impacts the cash flow forecasts and the overall financial health of the company.
Advance Core Financial Modelling Interview Questions
Even Cash Flow Method: Decision making related to stock market performance or a mutual fund investment, there is a particular entry point and an exit point.
Rate = (FV/PV)^(1/n)-1 (CAGR). Excel: Just type =rate (All the expected details).
Uneven Cash flow method: In regular cases, the returns are not calculated in the same method. In such cases we are more concerned about initial investment to start the business. The Free cashflow generated during lets say 4-5 years of the forecasting. Selling of assets and shutting down the business at the end. In these cases we use “ Internal rate of Return” u0026 “Net present value” Method.
In IRR, we try to estimate the rate of return based on the logic that there must be some rate, which can make NPV zero( Initial Investment- Future cash flows).
You can learn how to calculate this with a model here: Learn
This question will prove whether you understand time value of money in its intended way or not.
If you are answer is “Yes”, then you are wrong.
Continuation of the financial mathematics, based on the present value concepts.
We can value a company using DCF, by first forecasting the free cash flow of the company
FCFF- To find the enterprise Value
FCFE- To find the equity value
Usually we use FCFF because, it can also be used to find the acquisition value. When you acquire a company you pay the enterprise value.
We then estimate the cost of capital and cost of equity for the company based on the method chosen. If we are using FCFF, then we use WACC (Weighted average cost of capital), else we use Cost of equity (Derived from CAPM)
We discount the cashflow back to zero based on the discounting rate( either WACC or Ke ). Also since we are discounting only the forecasted period, but the business is a going concern hence we use the concept of Gordon growth model (Very similar to the present value of $100 example taken above).
Explicit Forecasted Present value
Perpetual growth
Lets say we are hypothetically valuing Infosys. Its FCFE for 3 years( Forecasted period) is as follows
$5000
$6500
$10000
Ke: 12%
Perpetual Growth rate: 5%
No of shares= 1000
CMP:$10
The interviewer is trying to test, if you have spend enough time spending on practical cases.
You can actually value a company with even negative cashflows but not by DCF. You can do that by using relative valuation. Some companies might be negative because of their growth phase, hence doesn’t really mean that the company has no value.
Do valuation based on P/E, EV/EBITDA etc. on profitable companies and then try to adjust it to estimate the value of the negative cash flow company
You could also do the same with DCF, and try to predict the profitable phase.
You can do asset based valuation, so no cash flow needed.
Can you tell what the purpose is?
Lets say he says filtering based on the highest return performance, then
Return on Equity
Return on capital
ROE and ROC are very important ratios for filtration, because any company consistently performing over and above 15% ROC u0026 ROE is likely also to continue to perform better.
Revenue drivers are important. You can’t really understand a business, if you don’t have the ability to understand the two most important factors behind the revenue
Price X Quantity.
No! The grocery store revenue driver is not Price of inventory X Quantity of inventory.
How can you really predict or forecast the inventory. Also how can you ever judge whether the goods are actually getting sold or not. The simplest way to think about revenue drivers is to think, this way.
What is the similarity between a large super market and small grocery store?
Space!
Larger space, larger revenue. Hence area matters in a super market business. So how about we design the revenue driver as:
Revenue Per sq feet (That’s price) x Space
Now you can forecast the revenue of the grocery store by forecasting space or the revenue per sq feet ( premium products staking will leading higher revenue per sq feet)
Project finance is usually funded through debt and the banks want to know whether your business has the capability to repay. Hence practically they want to understand if your cashflows are going to be enough to cover the interest and principal payments
So the ratios we can use is
Debt Service coverage ratio
Interest Coverage Ratio
Pay back period
Discounted pay pack period
Profitability Index
In a normal layman’s talk , this is impossible but if you think about the possibilities then it is.
Larger number of employees doesn’t mean good. Higher number of employees can also mean, more costs of maintaining an employee.
It might be possible to increase revenue by incentivising a smaller number of employees and removing inefficient employees.
Why for example: Lets you had 10 employees and you were paying them $1000 in total. Out of which 5 employees are under performing on a major scale. The rest 5 star performers though feel under paid.
Hence we could pay each one of the 10% higher and saving $500. So you not only saved $500 but also may be increase the motivation of the star performers to perform at 100% capacity
Break even sales is the minimum sales you would have to do, in order to cover your fixed costs. Its very important for a business to constantly know, whats the kind of minimum sales required to not shut down.
Hence here you need to understand what is variable cost and what is fixed costs. Variable costs include- salaries, raw materials etc. Fixed costs include rent, plant and machinery maintenance.
So divide the fixed costs by average revenue to find the break even sales
Net operating income is EBIT in normal sense that’s all. The only difference in real estate is that we generally consider real estate maintenance expenses, tax etc
n a very common sense level, this is similar to dividend yield. In dividend yield you were trying to find the income to price. Similary in real estate you change that to NOI/ Price.
Hence real estate companies talk in terms of 5%, 10%, 6% exit cap rate. There is no DCF that takes place in case of real estate.
At the start of the acquisition of the real estate property we are interested in at what exit cap rate can we exit this property later on.
Valuation & Forecasting Financial Modelling Interview Questions
How is the Perpetual Growth Model used in DCF valuation?
Explanation: The Perpetual Growth Model, also known as the Gordon Growth Model, is used in the terminal value calculation of a Discounted Cash Flow (DCF) analysis. It assumes that free cash flows will grow at a constant rate indefinitely. The formula is Terminal Value = (Final Year Free Cash Flow * (1 + g)) / (r – g), where “g” is the perpetual growth rate and “r” is the discount rate.
What is Financial Forecasting and why is it important?
Financial forecasting involves predicting future financial performance based on historical data, current trends, and assumptions about future conditions. It is crucial for budgeting, planning, and decision-making, as it helps companies anticipate revenues, expenses, and capital needs.
How would you calculate the Discounted Payback Period?
The Discounted Payback Period is the time it takes for an investment to break even in terms of net present value (NPV). Unlike the regular payback period, it accounts for the time value of money by discounting the cash flows. It is calculated by summing the discounted cash flows until they equal the initial investment.
Financial Modeling Interview Questions Best practices
What are the top best practices in financial modeling?
Financial modeling best practices are essential for creating accurate and reliable models. The top best practices include:
• Simplicity: Keep the model as simple as possible while still capturing the necessary details. Avoid overcomplicating with unnecessary calculations.
• Transparency: Make sure all assumptions, inputs, and calculations are clear and well-documented. Use comments or separate sheets for assumptions and sources.
• Consistency: Use consistent formatting, naming conventions, and color-coding throughout the model. This makes it easier to follow and reduces the risk of errors.
• Modularity: Build the model in distinct, easily understandable sections, such as separate tabs for income statements, balance sheets, and cash flow statements.
• Error Checking: Regularly check for errors by auditing formulas, using Excel’s error-checking tools, and conducting scenario analysis.
How can you ensure the robustness of your financial model?
Ensuring the robustness of a financial model involves several key steps:
• Stress Testing: Stress testing involves pushing the model’s inputs to their extremes to see how the outputs behave. This helps identify vulnerabilities or areas where the model may fail under different scenarios.
• Scenario Analysis: Conducting scenario analysis allows you to test the model under various conditions, such as best-case, worst-case, and base-case scenarios. This provides insights into how changes in key variables affect the overall outcomes.
• Model Auditing: We should regularly audit the model by reviewing all calculations, cross-checking formulas, and using Excel’s auditing tools. This process helps you identify and correct errors before finalizing the model.
• Version Control: Maintain version control to track changes and if needed revert to previous versions. This helps in keeping the model’s integrity intact, especially when multiple users are involved.
Real estate financial modeling interview questions
How would you model the impact of rent escalations and lease renewals in a multi-tenant property?
n a multi-tenant property, rent escalations and lease renewals are crucial factors that affect cash flow projections. To model this, you need to set up schedules for each tenant that account for:
• Base rent increases: These are often tied to inflation (CPI adjustments) or fixed percentage increases.
• Lease renewal options: Include assumptions on renewal probability, potential rent increases, and vacancy periods between leases.
• Step rents: Model the effect of staggered rent increases over the lease term. The overall impact on NOI should reflect these variables over the investment horizon.
How do you approach modeling a joint venture (JV) partnership in a real estate development project?
When modeling a JV partnership, it’s essential to reflect the different equity contributions, preferred returns, and profit-sharing arrangements:
• Equity Contribution: Model the capital contributions from each partner according to the agreed structure (e.g., 70/30, 60/40).
• Preferred Return (Hurdle Rate): Calculate the preferred return on equity before profits are distributed.
• Profit Sharing (Waterfall Distribution): Implement the waterfall structure, where profits are distributed according to pre-agreed tiers, such as IRR hurdles or cash-on-cash returns.
• Promote Structure: Include any promote structures where the developer or a specific partner receives a higher share of profits after certain financial milestones are achieved.
How would you incorporate the impact of property taxes that change with property reassessment in your model?
Property taxes can change significantly after a reassessment, which usually occurs after a property sale or significant improvement:
• Current Property Tax: Start with the current tax rate applied to the assessed value.
• Reassessment: Model the impact of a new assessment value post-acquisition or after significant capital improvements. This may involve estimating a new tax rate based on comparable property sales or improvements.
• Tax Abatements: Consider any tax abatement programs that might delay or reduce the tax burden for a specified period.
• Future Tax Growth: Incorporate assumptions on how property taxes will escalate annually based on local tax laws and projected appreciation in property value.
Explain how you would model debt structuring with a combination of senior debt, mezzanine financing, and equity in a real estate investment.
Debt structuring with multiple layers of financing involves careful modeling of cash flows and repayments:
• Senior Debt: Model the senior debt first, including interest payments, amortization schedules, and covenants. Senior debt usually has the lowest interest rate but the highest claim on cash flows.
• Mezzanine Financing: Include mezzanine financing, which typically comes with a higher interest rate and can include equity participation or warrants. Borrowers make payments on debt after they meet senior debt obligations.
• Equity: Model the equity contribution last, and reflect the residual cash flows after you have satisfied all debt obligations.. The equity holders’ return is based on cash flows remaining after servicing both senior and mezzanine debt.
• Debt Coverage Ratios: Calculate key metrics like Debt Service Coverage Ratio (DSCR) to ensure the project can service its debt at all levels.
How do you model a property that requires significant deferred maintenance, which you plan to address through capital expenditures over time?
Modeling a property with deferred maintenance requires detailed capital expenditure planning and its impact on future cash flows:
• Initial Assessment: Identify, estimate the cost of deferred maintenance to be addressed immediately or over first few years.
• CapEx Schedule: Create a schedule for capital expenditures, detailing timeline of work and how much it will cost. Spread these costs over the project timeline.
• Impact on Cash Flow: Reflect the impact of these expenditures on cash flow, both in terms of the outlay for maintenance and potential increases in rental income or property value due to improvements.
• Financing: Whether the Cap Ex will be financed through additional debt or paid by operating cash flow.
• Depreciation and Tax Benefits: Include the effects of depreciation on the capital improvements and any tax benefits that may arise from these expenditures.
Role specific Financial Modelling Questions
Financial Analyst:
What is ZBB ? What are your recommendations ?
Zero-base budgeting is a process of budgeting where manager has to build a budget from scratch (From zero) which helps with allocation of resources. With proper training and awareness ZBB can increase efficiency by 5-10%.
What are the roles of Financial Analyst ?
`1. Analyzing financial information like ratio analysis profitability, economic trends, potential financial risks to interpret results and make Investments decisions.
2. Illustrate technical reports like annual budget using spreadsheets.
3. Project reveune, cashflow and costs with help of financial models.
4. Performing investment analysis for making data driven decisions.
5. Collaborate with sales, marketing departments to gain essential views.
What are the three main financial statements?
- Income statement also called Profit and loss statement which shows company’s performance over period, we can conclude if the company is profitable or not.
- Balance sheet shows company’s financial level at a certain point in time.
- Cashflow statement shows us in and out cash flow of business.
Equity Research:
What is a LBO ?
Leveraged buyouts (LBO) means acquiring company through borrowed amount to meet the acquisition cost. This improves operations and revenue, eventually sell the company at profit.
What is industry cyclicality ?
Cyclical industries are dependent on economic performance for their revenue and profitability, meaning when economic conditions drop these industry sales drop.Usually cpmanies like automobile industry, luxury goods come under this.
What is rollover equity ?
Owners or stakeholders sometimes retain part ownership. For example, if an owner sells 80% of the company and keeps 20% invested in the business, that 20% is considered rollover equity.
Investment banking:
How would you value a company ?
Estimating the company’s worth by discounted cash flow analysis (DCF) calculated with the help of free cash flows and discount rate also add terminal value best for mature companies, comparable company analysis identify same industry companies compare metrics like EV/EBITDA also P/E ratio, asset based valuation meaning company’s net asset worth, market capitalization is generally for public companies where the calculation is share price x total shares outstanding.

What might cause company’s present value to increase or decrease ?
There are many reasons why will this happen: Profit growth, new product launch, cost efficiency, industry growth, reduced growth are some increased value examples where as decrease in value can happen because of legal issues, high debt, product failures, bad acquisitions.
What does working capital mean?
We calculate capital of business by subtracting current asset, current liabilities this measures company’s financial well-being and operational efficiency.
Company specific Financial Modelling Interview Questions
Insync analytics:
EV/EBITDA vs EV/EBIT?
We use valuation methods to understand a company’s financial performance, though they differ slightly. EV/EBITDA shows us cash operating performance by dividing enterprise value (EV) by earnings before interest, taxes, depreciation, and amortization. We typically use this in early-stage analysis. EV/EBIT reveals core profitability by dividing EV by earnings before interest and taxes, and we usually apply it to mature companies.
EV/EBITDA vs EV/Net Income?
EV/Net income is calculated by dividing Enterprise value (EV) with net income this gives earnings after all expenses. Both focus of different parts, use EV/EBITDA to compare operations whereas use EV/Net income to compare earnings per stock price.

SG Analytics:
What is venture capital?
A type of financing where investors invest in startups at early stages which have high growth potential in exchange of equity where the Venture Capitalist’s also mentor and guide the founders.
What is private equity?
Investment in private companies or public with the intention of improving the performance, sales and also revenue to sell later for profit.
What is 2/20 rule in hedge fund?
A hedge fund charges 2% Management fee on total asset under management annually to cover the operation costs and payments. It also takes 20% Performance fee is of the profit to reward the manager for his/her performance.
Incedo.inc:
What is mutual fund?
Here, investors provide the investment money, and the fund manager professionally manages it by investing in a diversified portfolio of assets.
What does Bloomberg terminal mean?
Finance professionals use Bloomberg software to analyze real time financial data, news, and analytics which they considered gold standard in financial information system. Bloomberg terminal helps with data driven decisions, investment decisions, trading and monitoring.
Financial Modelling interview case study
These are case study based questions which require you to solve the model and share the excel file back with the employer. Attached below is an excel template file which contain a small incomes statement,
Recommend courses, books, and online tutorials
Courses & Books to Check Out
Here are some recommended courses, books, and online tutorials to further enhance your financial modelling skills:
- Here are some recommended courses , books, and online tutorials to further enhance your financial modelling skills:
Online Tutorials
Various Areas of Financial Modelling Skills Tested
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FAQ’s
Are the financial modelling interview questions for freshers different compared to the above?
No. The above questions are specifically testable for freshers
What are the KPMG financial modelling interview questions?
Candidates under KPMG financial modeling assessment would require a testing of various technical, practical, and behavioral skills as well. Most probably you will have to create, present or modify a three-stated financial model, undertake a DCF, and structural and operational things such as handling circular references and scenario analyses etc in Excel. It is essential to know the basics core financial ratios and valuation basics, as well as how to treat difficult issues such as modeling depreciation, capex and other complex items.This focus on practical abilities guarantees that those who are hired have not only the theoretical knowledge to perform the work required of them but also the problem solving and practical skills to undertake the role.
What questions do they ask in a modeling interview?
In a modelling interview the type of questions can vary but majorly the focus will be on financial statement linkages, valuation basics, Ratio analysis and some business understanding.
What is financial modeling in FP&A?
Financial planning and analysis gets applied in the form of capital budgeting and forecasting decision making.
Financial Modelling Questions Case Study.pdf
FAQ’S
No. The above questions are specifically testable for freshers
Candidates under KPMG financial modeling assessment would require a testing of various technical, practical, and behavioral skills as well. Most probably you will have to create, present or modify a three-stated financial model, undertake a DCF, and structural and operational things such as handling circular references and scenario analyses etc in Excel. It is essential to know the basics core financial ratios, valuation basics, as well as how to treat difficult issues such as modeling depreciation, capex and other complex items.
In a modelling interview the type of questions can vary but majorly the focus will be on financial statement linkages, valuation basics, Ratio analysis and some business understanding.
We apply financial planning, analysis in the form of capital budgeting and forecasting decision making.
Finance Role | Key Financial Modeling Skills Tested | Specific Areas of Focus |
---|---|---|
Investment Banking Analyst | Valuation Techniques | DCF Analysis, Comparable Company Analysis, Precedent Transactions |
Merger and Acquisition (M&A) Modeling | LBO Modeling, Sensitivity Analysis | |
Three-Statement Modeling | Income Statement, Balance Sheet, Cash Flow Statement Linking | |
Equity Research Analyst | Company Valuation | DCF, Earnings Forecasting, Revenue Drivers |
Financial Statement Analysis | Historical Performance Analysis, Ratio Analysis | |
Scenario and Sensitivity Analysis | Impact of Market Conditions on Stock Valuation | |
Corporate Finance Analyst (FP&A) | Budgeting and Forecasting | Cash Flow Projections, Expense Forecasting |
Variance Analysis | Comparing Actuals vs. Forecasts, Identifying Drivers of Variance | |
Financial Planning | Capital Budgeting, Long-Term Financial Strategy | |
Private Equity Analyst | LBO (Leveraged Buyout) Modeling | Capital Structure Optimization, Debt Schedules |
Valuation Analysis | DCF, Exit Multiples, IRR and MOIC Calculations | |
Scenario Analysis | Best-Case, Base-Case, Worst-Case Scenarios | |
Credit Analyst | Credit Risk Modeling | Debt Service Coverage Ratio (DSCR), Interest Coverage Ratio |
Cash Flow Analysis | Cash Flow Forecasting, Liquidity Analysis | |
Sensitivity Testing | Impact of Interest Rate Changes on Debt Repayment Capacity | |
Real Estate Analyst | Real Estate Valuation | Net Operating Income (NOI), Exit Cap Rate, Comparable Properties |
Cash Flow Modeling | Rental Income Projections, Capital Expenditures Forecasting | |
Scenario Analysis | Market Conditions Impact on Property Valuation | |
Treasury Analyst | Cash Flow Management | Liquidity Forecasting, Working Capital Management |
Financial Risk Management | Interest Rate Risk, Currency Risk Modeling | |
Debt and Investment Portfolio Management | Debt Schedules, Investment Return Analysis | |
Venture Capital Analyst | Startup Valuation | Pre-Money and Post-Money Valuation, Dilution Analysis |
Financial Projections | Revenue Growth Forecasting, Burn Rate Analysis | |
Sensitivity and Scenario Analysis | Market Expansion, Product Launch Scenarios | |
Financial Planning and Analysis (FP&A) Manager | Long-Term Financial Planning | Strategic Planning, Forecasting Multiple Scenarios |

