Many of those who aspire to work in the financial services sector zero in on a financial analyst job as a career goal. These professionals monitor and evaluate the economy, industries, and companies to help make investment decisions for banks, insurance companies, investment firms, and corporations.
- Be ready to explain which software programs you prefer to use, and why.
- Prepare succinct and articulate explanations of the uses of key processes such as financial modeling.
- Think through the key metrics you consider most important, and why.
If you land an interview for a financial analyst position, you will need to demonstrate your understanding of basic financial analysis and your skills at evaluating economic conditions and companies. The interview is also likely to include some technical questions.
Here are three common questions you might hear if you are interviewing for a financial analyst position, and some tips on how to make the most of your answers.
Question 1: What Programs Would You Use to Prepare Illustrated Technical Reports With Graphs, Spreadsheets, or Charts?
The devil is in the details. Don't just mention a specific program. Explain why you would choose one program over another, while also indicating your willingness and ability to use any program the company prefers.
You could say you prefer Microsoft Excel because it allows you to present a wide variety of statistical and analytical reference points. Or, you could answer that you prefer Stimulsoft Ultimate because you feel it allows you to create superior visual representations that help make your point to people less familiar with financial analysis.
Either answer is fine since both make it clear that you are comfortable enough in their uses to make fine distinctions between them. Be sure to add that you are confident in your ability to quickly master any program or programs the company prefers.
Question 2: Explain Financial Modeling
A big part of a financial analyst's job is financial modeling, so it is likely that questions about it will be asked in an interview.
The question could be as straightforward as, "What is financial modeling?" Get ready to spit out a reasonably succinct and grammatically-correct answer. For example: "Financial modeling is a quantitative analysis commonly used for either asset pricing or general corporate finance. Essentially, hypothetical variables are used in a formula to determine the likely impact on market behavior, profitability, or economic conditions."
Prepare an example or two to add to the conversation. For instance, you could explain how financial modeling might be used to determine the effect of rising crude prices on an airline's jet fuel costs.
Question 3: What Do You Think Is the Single Best Metric for Analyzing a Company's Stock?
This is another question with no right answer. You should be able to point to a specific metric and explain your reasoning.
For example, you could say that the first metric you look at when evaluating a company is its operating profit margin. You prefer it because it provides not only an indication of its basic profitability but a sense of the quality of its management.
Alternately, you could say the price/earnings to growth ratio (PEG) is the most complete equity valuation metric because it factors in the projected earnings growth rate, making it superior to the more commonly used price/earnings ratio (P/E).
Make a good case for the metric of your choice and you'll be showing your understanding of metrics in general.
It's a good idea to add that no single metric should be used to make a judgment about an investment. Be sure to tell the interviewer that you prefer to examine companies from many perspectives.