List of commonly asked accounting interview questions:
#1 Walk me through the 3 financial statements.
The balance sheet shows a company’s assets, its liabilities and shareholders’ equity. The income statement outlines the company’s revenues and expenses. The cash flow statement shows the cash flows from operating, investing and financing activities.
#2 If I had only 1 statement and wanted to review the overall health of a company, which statement would I use and why?
Cash is king. The cash flow statement gives a true picture of how much cash the company is generating. That being said, it’s important to highly that all three statements truly are required to get a full picture of the health of a company. Learn more about how the three financial statements are linked.
#3 What happens on the income statement if inventory goes up by $10?
Nothing. This is a trick question. The only impact will be on the balance sheet and cash flow statement.
#4 What is working capital?
Working capital is typically defined as current assets less current liabilities. In banking, working capital is normally defined more narrowly as current assets (excluding cash) less current liabilities (excluding interest-bearing debt).
#5 What does having negative working capital mean?
Negative working capital is common in some industries such as grocery retail and the restaurant business. For a grocery store, customers pay upfront, inventory moves relatively quickly but suppliers often give 30 days (or more) credit. This means that the company receives cash from customers before it needs the cash to pay suppliers. Negative working capital is a sign of efficiency in businesses with low inventory and accounts receivable. In other industries, negative working capital may signal a company is facing financial trouble.
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Lakshya Institute Of IT Education
Near Bharat Gas Agency
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