How do you analyze financial performance and compare actual results with plans and forecasts?

Corporate Finance Analyst Interview Questions

Sample answer to the question

In analyzing financial performance, I start by reviewing actual financial results, such as the income statement, balance sheet, and cash flow statement. I compare these results with the plans and forecasts that were made for the period. I identify any variations or deviations between the actual results and the plans, and then I dig deeper to understand the reasons behind those differences. I analyze the trends and patterns in the data to identify potential areas of improvement or concern. I also utilize financial ratios and benchmarks to assess the overall financial health and performance of the company. Additionally, I collaborate with other departments, such as accounting, to ensure accurate and timely financial reporting.

A more solid answer

To analyze financial performance, I start by collecting and reviewing actual financial data, including income statements, balance sheets, and cash flow statements. Then, I compare these actual results with the plans and forecasts that were made for the period. I use financial ratios, such as profitability ratios and liquidity ratios, to assess the company's financial health and performance. I also conduct variance analysis to identify the reasons behind any deviations from the plans. This involves identifying the key drivers of the variances and assessing their impact on the overall performance. Additionally, I collaborate with the accounting team to ensure accurate and timely financial reporting. By analyzing the trends and patterns in the data, I can provide insights and recommendations for improving the financial performance of the company.

Why this is a more solid answer:

This is a solid answer because it provides more specific details about the candidate's process of analyzing financial performance and comparing it to plans and forecasts. It mentions the use of financial ratios and variance analysis, which are important skills for a corporate finance analyst. The candidate also highlights the importance of collaboration with the accounting team for accurate financial reporting.

An exceptional answer

Analyzing financial performance involves a comprehensive approach that starts with collecting and reviewing the actual financial data, including income statements, balance sheets, and cash flow statements. I go beyond the surface-level analysis and dig deeper into the numbers to understand the underlying factors that drive the financial performance. This includes identifying the key drivers of the variances between the actual results and the plans, and assessing their impact on the overall performance. I also conduct trend analysis to identify patterns and recurring issues. To gain a holistic view, I use financial ratios, such as liquidity ratios, profitability ratios, and efficiency ratios, to assess the company's financial health and performance. In addition to quantitative analysis, I also consider qualitative factors, such as market trends and industry benchmarks, to provide a comprehensive evaluation. By collaborating with cross-functional teams, particularly the accounting team, I ensure accurate and timely financial reporting. I then consolidate my findings and provide actionable recommendations to optimize financial performance and drive strategic decision-making.

Why this is an exceptional answer:

This is an exceptional answer because it demonstrates a strong understanding of financial analysis techniques and the candidate's ability to go beyond basic analysis. The candidate mentions conducting trend analysis and considering qualitative factors, which show a more comprehensive approach to analyzing financial performance. The use of financial ratios and collaboration with cross-functional teams also highlight the candidate's proficiency in financial analysis and communication skills. The candidate's ability to provide actionable recommendations for optimizing financial performance and driving strategic decision-making adds further value to their answer.

How to prepare for this question

Familiarize yourself with financial statements, such as income statements, balance sheets, and cash flow statements. Understand the different components and how they interrelate.
Practice calculating and interpreting financial ratios, such as liquidity ratios, profitability ratios, and efficiency ratios. Understand their significance and implications for financial performance.
Learn about different financial analysis techniques, such as variance analysis and trend analysis. Understand how to identify and interpret key drivers of variances and patterns in data.
Stay updated with the latest industry trends and benchmarks. Understand how these factors can impact financial performance.
Brush up on your Excel skills, as it is a crucial tool for financial analysis. Practice using functions and formulas to perform calculations and create financial models.
Develop your communication and presentation skills. Be prepared to effectively communicate your findings and recommendations to cross-functional teams and leadership.
Highlight any experience or projects related to financial analysis, forecasting, and financial reporting on your resume and during the interview. Be ready to discuss your role, responsibilities, and achievements in detail.
Demonstrate your attention to detail and ability to prioritize workload by discussing examples of managing multiple tasks and meeting tight deadlines.
Prepare to give examples of problem-solving skills and decision-making abilities in a financial context. Discuss how you have identified and resolved financial issues or made strategic financial decisions in your past experience.
Practice answering behavioral interview questions that assess your analytical and problem-solving skills, such as 'Tell me about a time when you identified a financial issue and how you resolved it.' Be prepared to provide specific examples and quantify your achievements.

What interviewers are evaluating

Financial analysis
Variance analysis
Financial reporting
Accounting principles