Walk me through a ‘cash flow statement.’
This is one of the basic finance interview questions.
Being one of the essential financial statements, you’ll have to be well-prepared for this question as day in and day out you have to use cash flow statements to successfully build a three model statement.
When a recruiter asks this question during your interview, you can start by explaining the three main categories of cash flow statements:
- Operating activities
- Investing activities
- Financing activities
After calculating the total cash from all the above-listed categories, adding an opening cash balance, and further explaining all significant adjustments, you will arrive at the total change in cash. Mention all the necessary parts that are associated with it.
However, during the interview, the interviewer will also be looking out for something more beyond the bookish knowledge about cash flow statements. S/he must be interested in how the statement of cash flow is useful to a financial analyst.
Now, this could turn into your bonus point as you can walk through the intent of using the cash flow statement, which is listed below:
- Provides data and information about a firm’s liquidity status,
- Helps in outlining the firm’s ability to alter cash flows status in future
- Highlights the changes in account balances on the balance sheet
- Helps in depicting the company’s ability to meet expansion requirements in future
Gives the estimation of available free cash flow
