A financial analyst is a professional who gathers, analyzes, and interprets financial data to help businesses and individuals make informed financial decisions. They can be an integral asset to your company, which is why you need to ask strategic financial analyst interview questions before hiring one.
9 Strategic Financial Analyst Interview Questions
How do you know whether a financial analyst has the knowledge and problem-solving skills your company needs to go to the next level? Financial analysis, like other analytical positions, often requires familiarity with very specific information, as well as the ability to use it to deliver results. As you recruit the best analysts, you only have a short period of time to assess their qualifications. Here are some interview questions you may want to pose as you check whether a potential hire has the skillset your organization needs.
1. How do you analyze a financial statement?
This question tests your candidate’s understanding of different methods of financial analysis, including observing and quantifying trends and performing ratio analysis to figure out how a company’s performing.
2. What’s the difference between solvency and liquidity?
While this may seem like an easy question, it’s a great way to get your candidate to reveal how they support these two attributes. Liquidity refers to how well the company can meet its short-term obligations, and solvency deals with how well an organization can handle long-term debts.
3. How would you go about evaluating a company’s creditworthiness?
A financial analyst should have a strong understanding of the factors that indicate credit risk. Your candidate may respond with an answer that touches on the company’s ability to establish consistent cash flow, financial statements, credit ratings, and repayment history.
4. What is working capital, and why is it important to an organization?
Working capital refers to the short-term cash a company uses to fund its operations. It is an essential element of financial health. Your candidate should be able to tell you the primary components of working capital, factoring in assets and liabilities, and provide examples about how they would use it and maintain it.
5. Here are two investment opportunities. How would you assess and compare them?
By presenting hypothetical investment opportunities, you can understand:
- How your candidate views risk on an organizational level
- What their personal risk appetite is
- How they reconcile the two
You could even choose two investments that your company has already made and see how well the candidate’s answer jives with how the investments actually panned out.
6. What is the biggest mistake you’ve ever made as a financial analyst, and what did you learn from it?
Nobody’s perfect, and it’s a good sign if your potential hire can own up to making a mistake. More important is the lesson they learned. As the candidate answers, look for signs that they humbly accepted their error and that they found ways to use it to better inform their practice.
7. Imagine you discover a mistake in how this company structures its debt. How would you present this to decision-makers?
This is a great question for evaluating a candidate’s knowledge of debt structuring as well as their communication skills. A poor debt structure is often the result of a string of bad decisions, and presenting these to higher-ups takes both courage and tact.
8. While analyzing our books, you discover we’re overspending on overhead by 8%. How would you address this problem?
This could be a good way to see how well your candidate asks important questions. If they give a blanket answer, such as, “Discover ways of saving in other areas until the collected savings equal at least 8%,” they may be a little too eager and lack pragmatism.
Rather, they should start with several questions regarding what the overhead goes towards, the biggest overhead investments, and how these have evolved over time. This shows they can take a thoughtful approach to problem-solving.
9. How would you describe the concept of preferred stock to someone who has zero investing knowledge?
This question is designed to evaluate the candidate’s communication skills. Preferred stock refers to stock that entitles shareholders to payment before common stockholders get their cut. It also comes with different voting rights and other unique attributes.
But what you really want to know is how they would break all this down to someone unfamiliar with the concept. As you listen, do so from the perspective of someone who knows nothing about investing, and see how much sense the candidate’s answer makes.
Hire a Financial Analyst
During an interview, you want to ask questions that require the candidate to think instead of merely stating memorized information. In this way, you can get a sense of the kind of problem-solver and communicator you may be working with.
But asking the right financial analyst interview questions is only one part of the hiring process. The entire task of recruiting, screening, interviewing, and onboarding the right financial analyst can be daunting. Many choose to leave it up to professionals.
That’s where Insight Global’s outsourced recruiting services come in. We know how to recruit strong candidates and vet them for your company. Learn more by contacting our experts today.