FP&A Interview Questions

Below are real examples of the most common questions (and answers) used to hire for financial planning and analysis (FP&A) at corporations.

What are the most common FP&A interview questions?

Based on extensive research and feedback from professionals in financial planning and analysis, we’ve compiled the most likely interview questions to be asked by a hiring manager. In addition, we’ve also created what we think are the best answers to these FP&A interview questions.

FP&A questions with answers

Walk me through the 3 financial statements.

The balance sheet shows a company’s assets, its liabilities and shareholders’ equity and is a snapshot in time.  The income statement outlines the company’s revenues and expenses over a period of time (quarter / year).  The cash flow statement shows the cash flows from operating, investing and financing activities over a period of time.  The three financial statements all fit together to show a picture of the company’s health.

How does an inventory write down affect the three statements?

On the balance sheet the asset account of Inventory is reduced by the amount of the write down, and so is shareholders’ equity. The income statement is hit with an expense in either COGS or a separate line item for the amount of the write down, reducing net income.  On the cash flow statement, the write down is added back to CFO as it’s a non-cash expense but must not be double counted in the changes of non-cash working capital.

How do you record PP&E and why is this important?

There are essentially 4 areas to consider when accounting for PP&E on the balance sheet: initial purchase, depreciation, additions (capital expenditures), and dispositions.  In addition to these four you may also have to consider revaluation.  For many businesses PP&E is the main capital asset that generates revenue, profitability and cash flow.

If you were CFO of our company, what would keep you up at night?

Step back and give a high level overview of the company’s current financial position, or companies in that industry in general.  Highlight something on each of the three statements.  Income statement: growth, margins, profitability. Balance sheet: liquidity, capital assets, credit metrics, liquidity ratios. Cash flow statement: short term and long term cash flow profile, any need to raise money or return capital to shareholders. Whatever your answer to this question, just remember, the main job of the CFO is managing the company’s liquidity in an optimal way, and earning a rate of return in excess of the company’s cost of capital (WACC).

What does it take to be a great FP&A analyst?

We believe there are 3 important qualities: analytics, presentation, and soft skills. Check out our guide on the Analyst Trifecta. for a detailed breakdown of theses three skills so you can ace this question if it comes up in the interview.

Name three challenges facing our company.

Same as above question.  If asked both, pick different points and add some high level macro issues as well such as competition, interest rates, currency and foreign exchange, access to capital, etc. A well thought out answer will address both internal and external challenges.

What are the hallmarks of a good FP&A financial model?

First off, explain the main objectives of the FP&A department: measuring historical performance, evaluating future business needs, highlight issues and strengths in the business, clearly communicating the most relevant financial information to management, instilling confidence in the quality of information presented.  A good financial model must address all of these and be simple enough for anyone to understand, yet complex enough to handle all of the necessary detail of the business.

What’s the difference between budgeting and forecasting?

Budgeting is setting a plan for the future while forecasting is creating an estimate of what will actually happen.  Budgeting is a collaborative process, typically set once per year, and is static (unless it’s a rolling budget).  A forecast is based on incoming data and sets the most probable expectation of what will transpire, and is typically updated once a quarter.

How do you create a rolling budget or forecast model?

If it’s a 12 month rolling forecast you input the historical data that comes in each month at the front of the model and extend the end of the model out by one month of additional forecast.  The model “rolls over” every month (or whatever period is used) by extending the model out one column.

How do you model revenues for a company?

A bottom up approach to financial modeling involves starting with individual products / services, estimating average prices / fees per product or service and then growth rates.

A top down approach involves starting with the overall market size, estimating a company’s market share, and then translating that into revenue.

How do you model operating expenses for a company?

You can do a bottom up build however, typically operating expenses move in line with revenues.  As a result, many models forecast operating expenses as a percent of revenues.

How do you model working capital for a company?

There are three core components of working capital – accounts receivable, inventories, and accounts payable.  Typically these items are modeled to match what is happening with revenues and cost of sales by using “turns” or “days” ratios (e.g. inventory turns or inventory days).  For example, you could look at the historic relationship between revenues and accounts receivable by calculating receivable days.  Next you would forecast receivable days – linking it to forecast revenues.

What are the hallmarks of a good Excel model?

It’s important to have strong financial modeling fundamentals.  Wherever possible model assumptions (inputs) should be in one place and distinctly colored (typically bank models use blue font for model inputs).  Good Excel models also make it easy for users to understand how inputs are translated into outputs.  Good Excel models also include error checks to ensure the model is working correctly (e.g. the balance sheet balances, the cash flow calculations are correct, etc.).

What makes a “good” budget?

This is somewhat subjective.  In my opinion a good budget is one that has buy-in from all departments in the company (if possible), is realistic yet strives for achievement, has been risk adjusted to allow for a margin of error, is tied into the the company’s overall strategic plan.

More interview questions

Check out our other interview guides and explore our interactive career map to advance your finance career: