How to Prepare for a Financial Modeling Interview

How to Prepare for a Financial Modeling Interview

Interview anxiety is something that makes our recruitment potential less likely to happen. For example, fear of questions or stress can make us forget some key points. In this article, keySkillset will give you a couple of tips on how to prepare for a Financial Modeling interview. You will be able to gain more confidence and overcome stress through sound preparation.

The main focus will be the topics that you should master and prove your knowledge in. While doing your research, you should focus on the following technical skills:

Cash Flow Analysis

When making a decision, the company relies a lot on its financial situation. Specifically, you create your assumptions based on the outflow and inflow of cash. For example, a financial analyst needs to provide sound estimates when there is a net profit but a cash deficit. There are many variables that have an impact on the cash flow such as bad debt or an increase/decrease in Accounts Receivable. You need to be well prepared when you get tricky questions.

Valuation technique

Usually, the recruiter may ask to choose a single valuation technique. However, there is no right answer depending on your perception of valuation. As a tip, in order to strengthen your opinion try to provide an example of calculation. Also, It will prove your quantitative skills and how deep is your knowledge of financial modeling.

Changes in current assets

The balance sheet has very important parts that you should focus on. For instance, current assets and liabilities include inventory and accounts payable/receivable. Any changes within those variables will have an impact on the business and cash.

Discounted Cash Flow and Free Cash Flow

During the interview, a good financial analyst should be clear when providing the difference between Free Cash Flow (FCF) and Discounted Cash Flow (DCF). Moreover, you should prove its relevance when valuing the business. For preparation, train on how to choose the right discounting factor.

Ratio Analysis

In Financial Analysis, the application is more important than the formulas. Learn to calculate the ratio analysis and provide a logical comparison between companies or industries. Besides, some ratios can play a bigger role across specific sectors. Thus, the interviewer will pay more attention to your ratio of choice based on a particular sector.


There are more technical topics to cover on how to prepare for a Financial Modeling interview. This is just to warm up your preparation and increase your confidence. Practice more and apply the concepts in different case studies to improve your knowledge.

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