Technical: You are meeting with the CEO tomorrow and have been requested to present a four-slide deck about the current state of the company’s financial performance. Walk me through your slides.
Three slides can incorporate the core financial statements of the business - income statement, cash flow, and balance sheet. On these slides, a high-level (i.e., not itemized) overview would be necessary, with headline numbers clearly displayed. Commentary on these slides must describe the performance contributing to the numbers.
The final slide can be a qualitative assessment of the business finances, such as new initiatives that will affect financial performance, updates on capital markets activities, or guidance on future projections. Using a strategy framework such as Porter’s Five Forces demonstrates a structured way of covering all of the bases that affect the business.
However creative the candidate gets with their answer, be sure that it actually fits into the goal of the task: a brief overview of the company’s current financial performance.
Technical: List the two differences between diluted normalized earnings per share and earnings per share.
One-off revenues/costs from seasonality or restructurings are subtracted/added back to earnings to “normalize” them.
Potential shares outstanding (options, warrants, preferred stock, and convertible securities) are added to outstanding stock to comprise a base scenario of all total diluted equity holders.
Technical: What’s the difference between free cash flow to the firm (FCFF) and free cash flow to equity (FCFE)?
FCFF excludes the impact of interest expense and net debt issuance/repayments. Both aspects are included in FCFE, which is a measure of levered free cash flow, hence its inclusion.
Technical: How would you explain an interest rate swap derivative to a layman?
This question does two things: It tests the technical understanding of what a swap instrument is and how the candidate can explain its verbose nature in a vivid and direct manner.
Behavioral: Have you ever disagreed with senior management? How did you conduct yourself?
Finance managers regularly interface with senior management, and at times, must cross the bridge between the financial reality and the future aspirations that the business might have. Effectively steering senior management, while also communicating its vision into a financial plan of action, is a core skill of finance managers. Disagreement does not necessarily mean insubordination, so assess the candidate’s conviction and strength of character, equally alongside their ability to build consensus and reconcile differences.
Behavioral: Walk me through a time when your knowledge of financial regulations/standards enhanced your company.
Most finance managers have a classical training background in finance, such as CFA or ACA accreditations. Using this knowledge to further commercial developments or weed out inefficiencies is an excellent example of applying such skills in a positive manner. Examples can be in terms of actual operational improvements or strengthening the health of financial reports through an accounting measure change.
Behavioral: When you lead people, what is your leadership style? What inspires your management philosophy?
Look for examples of leadership situations. Don’t get hung up on the notional number of people led; inspiring an intern at the beginning of their career can be just as effective as leading 10 long-term staff members. Instead, focus on how they define their leadership philosophy and how that corresponds to any provided examples of managerial intervention scenarios.
Asking for the inspiration behind their management technique is an interesting callback to the early parts of the candidate’s career and perhaps their underlying motivations. Whether it’s a previous mentor, manager, or even a literary-based inspiration, focus on how the candidate learns from others and applies their positive aspects.
Behavioral: Recall a time where you had to prepare a financial analysis under a tight deadline. What steps did you take to succeed, or if you failed, how would you do it differently?
Asking for a success or failure scenario is an interesting dynamic to assess the candidate’s humility. The scenario they describe is inconsequential; what is important is to understand the process they used to handle pressure, or the learnings garnered and subsequent steps taken to rectify a failure.
If a candidate describes a failure, celebrate their candor and rounded nature for exposing a weakness. But be sure to ask them about more positive scenarios in future questions.
Behavioral: Detail a time where you had to work cross-functionally across business units to devise an innovative solution to a complex problem.
Cross-functionality is a core tenet of a finance manager’s job, and managing different stakeholders is a necessary skill to be assessed. Good candidates will correctly map out an example using the STAR (situation, task, action, and result) framework. The very best ones will be sure to keep the situation clear and brief, without turning to convoluted storyline plotting.
Look for examples of actions that demonstrate project management, communication, and motivational skills.