Finance Interview
Preparation
Presented by Kalika Bhardwaj
Objectives of the Session
To familiarize students with key finance
domains asked in interviews
To equip students with technical and
behavioral Q&A
To enhance confidence through mock
question practice
Key Topics Covered
Capital Markets
Fund Accounting
Hedge Fund Accounting
Syndicated Loans
Mutual Funds
Bank Loans
Investment Banking
Private Equity
OTC & Derivatives
Reconciliation
Dividend Accrual Reconciliation
Types of Accounts
Real - Debit what comes in
Credit what goes out
Personal – Debit the Receiver
Credit the Giver
Nominal – Debit all Expenses & Losses
Credit all Incomes & Gains
Accounting Equation-
Assests = Liabilities + Equity
Equity- Owner’s Residual Interest in the
Company
Double entry accounting- Affects atleast two
accounts or for every debit, there must be
Corresponding credit.
Journal entry- Recording Financial
Transaction
Accrual Accounting- Where revenue is
recorded when earned
Amortization- Its done for intangible assets.
3 main Financial statements- Income
statement, Balance Sheet, Cash Flow
Fictitious Assets- Fake or deceptive which is
written in multiple future accounting
periods.
Example- Preliminary Expenses.
Contingent Liabilities- Depends on occurrence
of Probable event in future.
Deferred Revenue Expenditure- an expense
which is revenue in nature which gives
benefits for number of accounting periods.
Advertising expense- which is amortized in N
number of years.
Types of Business Transactions are recorded-
Revenue and Capital Transaction.
Working Capital- Current Assets- Current
Liabilities.
GAAP- Generally Accepted Accounting
Principles.
Fiscal Year- 12 month period used for
accounting purpose.
Break even Point
Marginal Cost.
Capital Market
Capital markets are financial markets where
long-term securities (maturing in more
than one year) such as stocks and bonds
are issued and traded. These markets are
crucial for raising capital, investing, and
economic growth.
Segments of Capital Market
Primary Market
◦ This is where new securities are issued for the first
time.
◦ Companies raise capital by offering Initial Public
Offerings (IPOs) or bonds.
◦ Investors buy directly from the issuer.
◦ E.g., LIC IPO( Initial Public offer) in India.
Secondary Market –
This is where existing securities are traded
among investors.
◦ No capital is raised by the issuer in this market.
◦ Provides liquidity to investors.
◦ Examples: NSE, BSE, NYSE
Instruments Traded in Capital Market
Equity (Shares/Stocks):
◦ Ownership in a company.
◦ Shareholders may receive dividends and capital appreciation.
Bonds (Debentures):
◦ Debt instruments representing loans to companies or governments.
◦ Investors earn interest (coupon) and receive principal at maturity.
Exchange-Traded Funds (ETFs):
◦ Investment funds traded on exchanges like stocks.
◦ They track indices like Nifty or S&P 500 and offer diversification at low
cost.
Derivatives:
◦ Financial contracts derived from underlying assets (stocks, commodities,
etc.).
◦ Types: Futures, Options, Swaps.
◦ Used for hedging or speculation.
Key Participants in Capital Market
Companies (Issuers):
◦ Raise funds by issuing stocks or bonds.
◦ Use capital for expansion, projects, or debt repayment.
Investors:
◦ Can be retail (individuals) or institutional (mutual funds,
pension funds).
◦ Provide the capital and earn returns.
Exchanges:
◦ Platforms that facilitate the trading of securities.
◦ Ensure transparency, liquidity, and regulation.
◦ Examples: NSE, BSE, NYSE, NASDAQ.
Regulators:
◦ Maintain market integrity and protect investors.
◦ In India: SEBI (Securities and Exchange Board of India).
◦ In the US: SEC (Securities and Exchange Commission).
Fund Accounting
Fund accounting is a specialized accounting
system used by investment funds (mutual
funds, hedge funds, pension funds) to track
assets, liabilities, income, and expenses.
Q1: What is NAV and how is it calculated?
A:
NAV (Net Asset Value) is the per-share value of a
mutual fund. It's calculated as:
(Total Assets – Total Liabilities) / Number of
Outstanding Shares
Q2: What are the main tasks of a fund accountant?
A:
A fund accountant handles NAV calculation,
trade booking, income accruals, expense
allocation, reconciliations, and prepares
financial statements for funds.
How is hedge fund accounting different from mutual fund
accounting?
Ans. Hedge funds trade complex instruments like derivatives,
leverage, and shorts, requiring more sophisticated valuation
and performance fee calculations (like high-water mark and
hurdle rate), unlike mutual funds which are more standardized.
Top Indian Hedge Fund Administrators:
Kotak Mahindra Bank (Kotak Mahindra Trusteeship
Services)
◦ Offers fund administration, trust, and custody services
◦ SEBI-registered Category III AIF administrator
ICICI Prudential Asset Management (AIF Admin Services)
◦ Offers fund accounting, investor reporting, compliance and audit support
for hedge funds and alternative investment funds
Syndicated Loans
Q1: What is a syndicated loan?
A:
A syndicated loan is a loan offered by a
group of lenders to a single borrower,
usually for large projects. It spreads the risk
among multiple institutions.
Q2: What is the role of an agent bank in syndicated loans?
A:
The agent bank manages the administration — distributing payments, maintaining
records, and ensuring compliance with the loan agreement.
5. Mutual Funds
Q1: How do mutual funds work?
A:
Mutual funds pool money from investors to buy a diversified portfolio of securities.
Professional fund managers make investment decisions. Returns are based on the
fund’s NAV performance.
Q2: What are open-ended and closed-ended mutual funds?
A:
Open-ended funds allow investors to buy/sell units anytime.
Closed-ended funds have fixed maturity and are traded on stock exchanges.
📍 6. Bank Loans
Q1: What is the difference between a bank loan and a bond?
A:
Bank loans are typically private, shorter-term, and involve ongoing negotiation.
Bonds are marketable debt instruments traded publicly with fixed terms.
Q2: What are common fees in bank loans?
A:
Common fees include arrangement fees, commitment
fees, facility fees, admin fees, and interest spreads
over benchmarks like LIBOR/SOFR.
7. Investment Banking
Q1: What are the main divisions of investment banking?
A:
Major divisions include:
Merger & Acquisition Advisory
Underwriting / Capital Raising (Equity & Debt)
Sales & Trading
Asset Management
Research
Q2: What is the role of an analyst in investment banking?
A:
An analyst performs financial modeling, valuation , prepares pitch books, and
assists in client presentations and deal execution.
8. Private Equity
Q1: How does private equity differ from venture capital?
A:
PE invests in mature companies (buyouts or restructuring), while VC invests in early-
stage startups with high growth potential.
Q2: What is a leveraged buyout (LBO)?
A:
An LBO is when a PE firm acquires a company using a significant amount of debt. The
company’s assets are used as collateral.
9. OTC & Derivatives
Q1: What is the difference between OTC and exchange-traded derivatives?
A:
OTC derivatives are privately negotiated (e.g., forwards, swaps), customizable, and
less regulated. Exchange-traded derivatives (like futures/options) are
standardized and cleared through an exchange.
Q2: What is a forward contract?
A:
A forward is a customized agreement to buy/sell an asset at a
future date at a fixed price, typically traded OTC.
. Reconciliation (Most Important)
Q1: What is reconciliation in fund accounting?
A:
Reconciliation is the process of matching internal records (books)
with external records (custodians or brokers) to ensure accuracy in
positions, cash, and transactions.
Q2: What are the types of reconciliation?
A:
Cash Reconciliation
Position Reconciliation
Transaction Reconciliation
Market Value Reconciliation
Q3: How do you resolve a reconciliation break?
A:
Investigate the cause — late settlement, Fix difference, pricing issue — and
correct the entry in the system. Always document and escalate if needed.
. Dividend Accrual Reconciliation
Q1: What is dividend accrual and how is it reconciled?
A:
Dividend accrual is recording expected income from dividends that are
declared but not yet received.
Reconciliation involves matching declared dividend records with
receivables, ensuring proper ex-dividend dates and entitlement are
considered.
Q2: What are common causes of dividend accrual breaks?
A:
Wrong ex-dividend date
Incorrect shareholding
Delayed corporate action updates
FX conversion issues for foreign dividends