Technical Questions & Answers

1. Financial Statements & Accounting

Q1: Walk me through the three financial statements.

A:
The three main financial statements are:

1. Income Statement → Shows a company’s revenue, expenses, and profit/loss over a period of
time.

o Example: If a company sells ₹10 lakh worth of products and incurs ₹7 lakh in
expenses, its profit will be ₹3 lakh.

2. Balance Sheet → Shows a company’s financial position at a specific time, listing assets (what
it owns), liabilities (what it owes), and equity (owner’s investment).

o Example: A company owns ₹50 lakh in machinery (assets), owes ₹20 lakh in loans
(liabilities), and has ₹30 lakh in equity.

3. Cash Flow Statement → Shows how money moves in and out of a business, divided into
operations, investing, and financing activities.

o Example: If a company earns ₹5 lakh from sales but spends ₹2 lakh on buying new
equipment, the cash flow from operations is ₹3 lakh.

Q2: What is goodwill, and how is it accounted for?

A:
Goodwill is the extra amount a company pays when acquiring another company, beyond the actual
value of its assets. It represents brand value, customer loyalty, and reputation.

 Example: If Tata buys a startup worth ₹100 crore for ₹120 crore, the extra ₹20 crore is
goodwill.

 It is recorded as an intangible asset on the balance sheet.

2. Valuation & Corporate Finance

Q3: How would you value a company?

A:
There are three common methods:

1. Market Value Approach → Based on share price (useful for public companies).

o Example: If a company has 1 lakh shares trading at ₹100 each, its valuation is ₹1
crore.

2. Asset-Based Approach → Based on the total value of its assets minus liabilities.

o Example: If a company has ₹50 lakh worth of machinery and ₹20 lakh debt, its net
value is ₹30 lakh.
 3. Discounted Cash Flow (DCF) Approach → Estimates the company’s future cash flow and
discounts it to today’s value.

o Example: If a business is expected to generate ₹10 lakh per year for 10 years, we
discount it to present value to find its worth today.

Q4: What is WACC, and how is it calculated?

A:
WACC (Weighted Average Cost of Capital) is the company’s overall cost of raising money from
different sources (loans, investors, etc.).

 Example: If a company borrows ₹50 lakh at 10% interest and raises ₹50 lakh from investors
at 12% return, WACC will be a weighted average of these costs.

 It helps decide if a project is worth investing in.

3. Financial Ratios & Risk Management

Q5: What are liquidity, solvency, and profitability ratios?

A:

1. Liquidity Ratios → Show if a company can pay its short-term debts.

o Example: A current ratio of 2:1 means the company has ₹2 in assets for every ₹1 in
debt.

2. Solvency Ratios → Measure long-term financial health.

o Example: If a company has more debt than assets, it may go bankrupt.

3. Profitability Ratios → Show how much profit a company makes.

o Example: A net profit margin of 20% means ₹20 profit on every ₹100 sale.

Q6: What is the difference between systematic and unsystematic risk?

A:

 Systematic Risk → Market-wide risk that affects all companies (cannot be avoided).

o Example: COVID-19 affected all industries globally.

 Unsystematic Risk → Company-specific risk (can be reduced by diversification).

o Example: If Tata Motors faces a strike, it won’t affect Infosys.

4. Investment Banking & Markets

Q7: What is the difference between futures and options?

A:
  Futures → A contract to buy/sell an asset at a fixed price on a future date (compulsory to
execute).

o Example: If a farmer agrees to sell wheat at ₹25/kg after 3 months, even if the
market price drops to ₹20, the buyer must pay ₹25.

 Options → A contract that gives the right (but not the obligation) to buy/sell at a certain
price.

o Example: If you buy an option to buy TCS shares at ₹3,000 but the price drops to
₹2,500, you can ignore the deal.

Behavioral Questions & Answers

Q8: Why do you want to work at EY?

A:
“I want to work at EY because it is one of the top firms in finance and consulting, known for its strong
learning environment. I am passionate about financial analysis, and EY’s work in advisory, risk
management, and valuation excites me. I also like how EY helps businesses grow and make smart
financial decisions.”

Q9: Describe a time when you had to analyze complex data.

A:
“In my MBA project, I analyzed financial data of Indian startups using Excel and Power BI. I studied
revenue trends, cost structures, and profit margins to understand their performance. One startup
was losing money due to high customer acquisition costs, so I suggested reducing marketing
expenses and improving retention strategies.”

Case Study & Problem-Solving Questions

Q10: A company’s revenue is declining. How would you analyze the problem?
A:

1. Check Sales Data → Are fewer products being sold?

2. Customer Feedback → Are customers unhappy with price, quality, or service?

3. Market Trends → Is competition increasing?

4. Cost Analysis → Are costs rising, reducing profit margins?

Real Example:
When McDonald’s sales dropped in India, they analyzed the issue and found that competition from
local fast-food chains was rising. They introduced Indianized menu options like McAloo Tikki and ₹50
meals to attract budget-conscious customers.

Q11: A company wants to expand internationally. What financial factors should they consider?
A:
 1. Exchange Rates → How will currency fluctuations affect profits?

2. Local Taxes → What are the tax laws in the new country?

3. Market Demand → Do people need the product?

4. Regulations → Are there any legal restrictions?

Real Example:
When Reliance Jio planned to expand to the US, they had to study US telecom regulations, pricing
models, and customer demand before making a decision.

Final Tips for EY Interview

✔ Know financial concepts well → Be clear on valuation, financial statements, and risk
management.
✔ Practice case studies → Think logically and structure your answers.
✔ Be confident & clear → EY values communication skills.

Here are some case study questions with structured answers to help you prepare for your EY
interview. I'll break down the analysis in a simple and logical way.

Case Study 1: Declining Revenue of a Retail Company

Question:

A retail company’s revenue has been falling for the last two years. You are hired as a financial analyst
to find the reasons and suggest solutions.

Step-by-Step Analysis:

1. Identify Key Revenue Drivers

 Sales volume (Are people buying fewer products?)

 Price per unit (Has the company reduced prices to attract customers?)

 Customer base (Is the company losing customers?)

2. Possible Reasons for Declining Revenue

✅ Customer Shift to Competitors → New competitors might offer better prices or quality.
✅ Poor Marketing Strategies → Ineffective advertisements or weak online presence.
✅ Economic Slowdown → Customers spending less due to recession or inflation.
✅ High Product Returns → Poor quality leading to refunds.

3. Financial Analysis

 Compare historical sales data → Find trends in sales decline.

 Analyze profit margins → If costs are increasing, profit may shrink.

 Study cash flow → Is the company facing liquidity issues?

4. Solution Recommendations
✔ Improve customer engagement with loyalty programs and discounts.
✔ Optimize pricing strategy based on competitor analysis.
✔ Expand online sales channels (e-commerce and social media marketing).
✔ Reduce operational costs by negotiating with suppliers.

Case Study 2: A Company Facing High Operational Costs

Question:

A manufacturing company is struggling with high operational costs, which is reducing its profit
margins. How would you help reduce costs and improve profitability?

Step-by-Step Analysis:

1. Identify the Major Cost Drivers

✅ Raw Material Costs → Are suppliers charging higher prices?
✅ Labor Costs → Is the workforce too large or inefficient?
✅ Overhead Expenses → Are rent, electricity, and other fixed costs too high?
✅ Supply Chain Inefficiencies → Are there delays or wastage in the production process?

2. Financial Analysis

 Compare cost structure with industry benchmarks → Is the company overspending

compared to competitors?

 Identify wastage in the supply chain → Are materials being wasted due to poor planning?

 Analyze workforce productivity → Are employees contributing efficiently?

3. Solution Recommendations
✔ Negotiate better contracts with suppliers to get bulk discounts.
✔ Automate repetitive tasks to reduce labor costs.
✔ Reduce energy consumption by switching to cost-effective solutions.
✔ Optimize supply chain management to avoid unnecessary storage and transportation costs.

Case Study 3: Mergers & Acquisitions Decision

Question:

A company is considering acquiring a smaller competitor. What financial factors should it evaluate
before making the decision?

Step-by-Step Analysis:

1. Financial Factors to Evaluate

✅ Target Company’s Valuation → Is the acquisition price reasonable?
✅ Revenue & Profit Trends → Is the target company growing or struggling?
✅ Debt & Liabilities → Does the target company have outstanding loans?
✅ Synergies & Cost Savings → Can both companies reduce costs by merging?

2. Financial Analysis
  Discounted Cash Flow (DCF) Analysis → To check if the future cash flows justify the
acquisition price.

 Debt-to-Equity Ratio → To see if the company can afford the acquisition.

 Return on Investment (ROI) → Will the deal increase shareholder value?

3. Real Example:
When Facebook acquired WhatsApp for $19 billion, it looked at WhatsApp’s huge user base (400
million at the time) and potential for future monetization, even though WhatsApp had little
revenue.

4. Solution Recommendation:
✔ If the target company has strong financials and strategic advantages, the acquisition makes sense.
✔ If the company has too much debt or limited growth potential, the buyer should reconsider or
negotiate a lower price.

Case Study 4: Company Expanding to a New Market

Question:

A successful Indian food delivery startup wants to expand to the UAE. What financial and business
factors should it consider?

Step-by-Step Analysis:

1. Financial & Market Factors

✅ Market Demand → Is there enough demand for food delivery services in the UAE?
✅ Competition → Are there strong competitors like Talabat or Deliveroo?
✅ Legal & Tax Regulations → Are there restrictions on foreign businesses?
✅ Currency Exchange Rate Risks → Will fluctuations affect profitability?

2. Financial Analysis

 Cost-Benefit Analysis → Do the expected profits outweigh expansion costs?

 Investment Required → Office setup, hiring staff, marketing, delivery logistics.

 Breakeven Analysis → How long will it take to recover investment costs?

3. Solution Recommendations
✔ Conduct market research and test with a pilot launch in Dubai before full expansion.
✔ Form partnerships with local restaurants and delivery services to reduce costs.
✔ Offer competitive pricing & promotions to attract new customers.

Case Study 5: Managing a Cash Flow Crisis

Question:

A small business is profitable on paper but is struggling with cash flow shortages. What could be the
reasons, and how can it be fixed?

Step-by-Step Analysis:
1. Identify the Reasons for Cash Flow Problems
✅ Slow Customer Payments → Are clients taking too long to pay invoices?
✅ High Inventory Costs → Is too much money tied up in unsold products?
✅ Excessive Short-Term Debt → Are loan payments draining cash?

2. Financial Analysis

 Accounts Receivable Turnover Ratio → Measures how quickly payments are collected.

 Liquidity Ratios → Check if the company can meet short-term obligations.

 Cash Flow Statement Review → Identify which activities consume the most cash.

3. Solution Recommendations
✔ Offer early payment discounts to encourage faster customer payments.
✔ Reduce unnecessary inventory and switch to just-in-time (JIT) stock management.
✔ Negotiate better credit terms with suppliers to delay outgoing payments.

Real Example:
Many startups fail despite having profits because they run out of cash. For example, Jet Airways
collapsed because of liquidity issues even though it had a large customer base.

Final Tips for EY Case Studies

✔ Follow a structured approach → Identify the problem, analyze the financial data, and suggest
solutions.
✔ Use real-life examples → Mention companies like Tata, Reliance, Zomato, or global firms like
Amazon and Tesla.
✔ Think from EY’s perspective → EY provides financial consulting, so focus on financial impact and
strategic solutions.

Would you like to practice answering one of these case studies? 😊