Professional MBA Finance Interview Questions & Answers:

1. What is a deferred tax asset and why might one be created?

Deferred tax asset arises when a company actually pays more in taxes to the IRS than they show as an expense on their income statement in a reporting period.

Differences in revenue recognition, expense recognition (such as warranty expense), and net operating losses (NOLs) can create deferred tax assets.

2. What is a deferred tax liability and why might one be created?

Deferred tax liability is a tax expense amount reported on a company's income statement that is not actually paid to the IRS in that time period, but is expected to be paid in the future. It arises because when a company actually pays less in taxes to the IRS than they show as an expense on their income statement in a reporting period.
Differences in depreciation expense between book reporting (GAAP) and IRS reporting can lead to differences in income between the two, which ultimately leads to differences in tax expense reported in the financial statements and taxes payable to the IRS.

3. How is the income statement linked to the balance sheet?

Net income flows into retained earnings.

4. Why are increases in accounts receivable a cash reduction on the cash flow statement?

Since our cash flow statement starts with net income, an increase in accounts receivable is an adjustment to net income to reflect the fact that the company never actually received those funds.

5. How is it possible for a company to show positive net income but go bankrupt?

Two examples include deterioration of working capital (i.e. increasing accounts receivable, lowering accounts payable), and financial shenanigans.

6. Is it possible for a company to show positive cash flows but be in grave trouble?

Absolutely. Two examples involve unsustainable improvements in working capital (a company is selling off inventory and delaying payables), and another example involves lack of revenues going forward.in the pipeline.

7. Can you walk me through a cash flow statement?

Start with net income, go line by line through major adjustments (depreciation, changes in working capital and deferred taxes) to arrive at cash flows from operating activities.
Mention capital expenditures, asset sales, purchase of intangible assets, and purchase/sale of investment securities to arrive at cash flow from investing activities.
Mention repurchase/issuance of debt and equity and paying out dividends to arrive at cash flow from financing activities.
Adding cash flows from operations, cash flows from investments, and cash flows from financing gets you to total change of cash.
Beginning-of-period cash balance plus change in cash allows you to arrive at end-of-period cash balance.

8. What you have learnt from your failures?

I have learnt to analyze myself and find out my shortcomings. I have take those shortcomings seriously to improve myself in the future. You can even say I have learned to never give up, never to feel rejected etc.

9. Why you choose MBA?

The answer for this question may vary depending on your background. If you are a fresher finishing your bachelor degree, just say that an MBA would be the right option into the corporate world.
If you are someone having some work experience, then probably you may have different reasons to tell to them. For example you may choose to study the MBA program to switch industries or could be looking for more responsibilities in the same industry.

10. MBA Finance Capital market interview questions:

❀ What does capital market mean?
❀ How does the company raise funds in capital market?
❀ What "rights issue" do the shareholders of a company have under Companies Act?
❀ What are the eligibility criteria for an unlisted company to make public issue?