Accounting
Articles
Was ist Working Capital?
Working Capital explained: the Net Working Capital (NWC) formula, why it measures liquidity, how it drives free cash flow in a DCF, and how to improve it.
Understanding the Balance Sheet (Bilanz) Under HGB – A Comprehensive Guide
HGB-Bilanz erklärt: Aufbau, Bewertung, Größenklassen und HGB vs. IFRS — the German balance sheet under HGB, explained in English. Jetzt üben.
The Balance Sheet: A Deep Dive into Structure, Limitations, and Key Accounts
The balance sheet is one of the three core financial statements, alongside the income statement and the cash flow statement. It provides a snapshot of a company's financial position at a specific point in time, detailing what it owns (assets), what it owes (liabilities), and what is left for shareholders (equity).
Why Does Depreciation Increase Cash Flow Even Though It Lowers Net Income?
Why does depreciation increase cash flow even though it lowers net income? The D&A tax shield explained step by step across all three statements. Jetzt üben.
How to Answer the '3-Statement Depreciation Change' Interview Question
How do you answer the '3-statement depreciation change' interview question? Master EBIT, the tax shield, and cash flow linkage step by step. Practice now.
Why Does Net Income Rise But Cash Flow Fall When Revenue Grows?
Why do Net Income and Cash Flow diverge when Revenue grows? Learn the Accounts Receivable mechanic behind this classic interview question. Practice now.
How to Answer the '3-Statement Revenue Increase' Interview Question
How do you answer the classic 'Revenue increases by $100' 3-statement interview question? Master the margin, cash flow, and balance check. Practice now.
Does Buying Inventory Affect the Income Statement? Here's What Actually Happens
Does buying inventory hit the income statement? Learn why it's a balance-sheet event, not an expense, in this classic finance interview question. Practice now.
3-Statement Interview Question: How to Answer 'Buy Inventory for Cash' Step by Step
How do you answer the 'buy $100 inventory for cash' 3-statement interview question? Master the 5-step framework top interviewers expect to hear. Practice now.
How Does Taking Out a Loan Affect the 3 Financial Statements?
How does taking out a $100 loan affect the 3 financial statements? Learn the two-stage answer: issuance day vs. ongoing interest expense. Practice now.
How to Answer the '$100 Loan' 3-Statement Interview Question
How do you answer the '$100 loan' 3-statement interview question? Master the 4-step framework, including the after-tax interest shield. Practice now.
Does Buying Equipment for Cash Affect the Income Statement? Here's What Actually Happens
Does buying equipment for cash hit the income statement? Learn why it's a balance-sheet CapEx event, not an expense, until depreciation begins. Practice now.
3-Statement Interview Question: How to Answer 'Buy Equipment for Cash' Step by Step
How do you answer the 'buy equipment for cash' 3-statement interview question? Master the 5-step framework for a confident, structured answer. Practice now.
Why Does Net Income Rise But Cash Flow Fall When Accounts Receivable Increases?
Why do Net Income and cash flow diverge when Accounts Receivable rises? Learn the accrual gap tested in this classic finance interview question. Practice now.
3-Statement Interview Question: How to Answer 'Accounts Receivable Increases by $50' Step by Step
How do you answer the 'Accounts Receivable increases by $50' 3-statement interview question? Master the 4-step framework for a confident answer. Practice now.
Why Dividends Don't Show Up on the Income Statement
Why don't dividends show up on the income statement? Learn how they hit Retained Earnings and the Cash Flow from Financing section instead. Practice now.
3-Statement Impact Questions in Interviews: A Step-by-Step Approach
How do you answer '3-statement impact' questions in finance interviews? Master the 4-question framework that works for any transaction. Practice now.
What Happens When a Company Issues Stock? The 3-Statement Impact
What happens when a company issues new stock for cash? Learn the full 3-statement impact, including exactly why dilution still happens. Practice now.
How to Answer '3-Statement Change' Interview Questions (Stock Issuance Example)
How do you answer '3-statement change' interview questions? Master the 3-step framework using a $100 stock issuance example, step by step. Practice now.
Capitalize vs. Expense: What It Means and Why It Moves EBITDA, Net Income, and Cash Flow
What's the difference between capitalizing and expensing a cost? Learn exactly why it moves EBITDA, EBIT, and cash flow so differently. Practice now.
How to Answer 'Capitalize or Expense?' in a Finance Interview (Step-by-Step)
How should you answer a capitalize-or-expense interview question? Follow this 4-step framework covering EBITDA, cash flow, and the balance sheet. Practice now.
Why Doesn't a Goodwill Impairment Increase Cash Flow? The Missing Tax Shield Explained
Why doesn't a Goodwill impairment boost cash flow like Depreciation does? Learn the missing tax shield behind this common interview trap. Practice now.
How to Answer the '3-Statement Goodwill Impairment' Interview Question
How do you answer a 3-statement Goodwill impairment interview question? Master the 4-step framework covering EBIT, tax, and cash flow impact. Practice now.
What Is Deferred Revenue? A Finance Interview Guide
What is deferred revenue and why is it recorded as a liability, not income? Learn how cash and revenue diverge under accrual accounting rules. Practice now.
How to Answer the 'Customer Pays Upfront' 3-Statement Interview Question
How do you answer the customer-pays-upfront 3-statement interview question? Master the 3-step deferred revenue framework for a confident answer. Practice now.
What Is EBITDA and Why Do Interviewers Ask About It?
A clear explanation of what EBITDA means, why banking and PE interviewers care about it, and how it differs from Net Income and cash flow.
How to Calculate EBITDA From Net Income (Step-by-Step for Interviews)
The exact three-step bridge from Net Income to EBITDA, with a worked example and the mistakes interviewers watch for.
What Is EBITDA Normalization? Non-Recurring Items Explained
EBITDA normalization strips one-time gains and expenses out of reported EBITDA to reveal a company's true, sustainable run-rate earnings for valuation.
How to Answer the EBITDA Normalization Interview Question
A step-by-step framework for answering "walk me through how you would normalize EBITDA" in an IB or PE interview, with a worked example.
What Is Goodwill and Why Does It Get Impaired?
A plain-English guide to how goodwill is created in an acquisition, why it isn't amortized, and what actually triggers a goodwill impairment charge.
How to Answer the Goodwill Impairment Interview Question
A step-by-step framework for answering the classic goodwill creation and impairment interview question, including the 3-statement walk-through interviewers listen for.
What Is IFRS 16 and Why Does It Inflate EBITDA?
IFRS 16 moved operating leases onto the balance sheet. Here's what changed, why EBITDA looks higher afterward, and why leverage ratios don't automatically improve.
How to Answer an IFRS 16 Lease Accounting Question in an Interview
A step-by-step approach for answering IFRS 16 lease accounting questions in finance interviews, from the lease liability formula to the EBITDA and leverage follow-ups.
Deferred Tax Assets vs. Liabilities Explained (DTA vs DTL)
DTA vs DTL: how deferred tax assets and liabilities arise, which way the timing difference runs, and how each one reverses — with worked examples. Jetzt üben.
How to Answer a Deferred Tax Interview Question (Step by Step)
How do you answer a deferred tax interview question step by step? Learn the direction rule for DTLs and DTAs with a fully worked example. Practice now.
What Is Free Cash Flow? Unlevered vs. Levered FCF Explained
What is Free Cash Flow, and how do Unlevered FCF and Levered FCF differ in a DCF and LBO interview? Learn which valuation each one feeds. Practice now.
How to Calculate Free Cash Flow from Net Income (Interview Walkthrough)
How do you calculate Free Cash Flow from Net Income in an interview? A 4-step framework covering D&A, after-tax interest, CapEx, and NWC. Practice now.
What Is Stock-Based Compensation (SBC) and Why Does It Matter for Valuation?
What is stock-based compensation, and why can it distort a DCF valuation through hidden share dilution? Learn the non-cash-but-not-free rule. Practice now.
How to Calculate the Cash Flow and Dilution Impact of Stock-Based Compensation (Interview Walkthrough)
How do you calculate the cash-flow add-back and the share-dilution impact of stock-based compensation in an interview? A 3-step framework. Practice now.
What Is Net Working Capital? Cash Conversion Cycle Explained
What is net working capital, and how does the Cash Conversion Cycle connect DSO, DIO, and DPO in an interview? Learn the source-of-cash rule. Practice now.
How to Calculate Working Capital in an Interview (DSO, DIO, DPO Walkthrough)
How do you calculate working capital in an interview using DSO, DIO, and DPO? A 4-step framework to state the source-or-use conclusion. Practice now.
What Is Off-Balance-Sheet Financing? SPVs and Synthetic Leases Explained
What is off-balance-sheet financing, and how do SPVs and synthetic leases hide debt from a company's balance sheet? Learn the VIE test. Practice now.
How to Answer an Off-Balance-Sheet Financing Interview Question
How do you answer an off-balance-sheet financing interview question with confidence? Learn the 4-step SPV and synthetic lease framework. Practice now.
What Is Revenue Quality? Channel Stuffing, Bill-and-Hold, and Other Red Flags Explained
What is revenue quality, and how do channel stuffing and bill-and-hold arrangements distort a company's reported growth? Learn the DSO check. Practice now.
How to Answer a Revenue Quality Assessment Interview Question
How do you answer a revenue quality assessment question in a finance interview? Learn the 5-step DSO and red-flag framework used by top firms. Practice now.
What Is Earnings Quality? The Accruals Ratio and the Red Flags That Signal It's Slipping
What is earnings quality and why does the accruals ratio matter in finance interviews? Learn the formula, cash conversion, and red flags. Practice now.
How to Answer an Earnings Quality Interview Question: Accruals Ratio Walkthrough
How do you answer an earnings quality interview question with confidence? Learn the 4-step accruals ratio and cash conversion framework. Practice now.
Why IFRS 16 Hits Airlines, Retailers, and Telecoms Differently
Why does IFRS 16 hit airlines, retailers, and telecoms so differently? Learn the lease-term and EBITDA drivers interviewers expect you to explain. Practice now.
How to Answer 'Why Does IFRS 16 Affect Industries Differently?' in an Interview
How do you answer why IFRS 16 affects industries differently in a finance interview? Learn the 4-step EBITDA and leverage framework here. Practice now.
What Is Purchase Accounting? Goodwill, Step-Ups, and the Deferred Revenue Haircut Explained
What is purchase accounting and how does it work? Learn how goodwill, asset step-ups, and the deferred revenue haircut apply after a deal. Practice now.
How to Answer a Purchase Price Allocation Interview Question (Step-by-Step Framework)
How do you answer a purchase price allocation interview question? Master the 5-step framework covering step-ups, DTL, and goodwill plug. Practice now.
What Is Pension Accounting? PBO, Plan Assets, and the Corridor Method Explained
A plain-English breakdown of defined benefit pension accounting: how the PBO and plan assets roll forward, what funded status means, and why the corridor method smooths pension expense.
How to Answer a Pension Accounting Interview Question (Step-by-Step Framework)
A step-by-step framework for answering pension accounting interview questions: roll forward the PBO and plan assets, compute funded status, and calculate pension expense under the corridor method.
What Is Segment Reporting? How Cost Allocation Can Hide a Losing Business Unit
Segment footnotes are supposed to show which parts of a business make money — but management's cost-allocation choice can flatter a struggling segment. Here's what to check.
How to Analyze Segment Footnotes in a Finance Interview (Step-by-Step)
A four-step framework for reading a company's segment footnote in an interview: find the allocation method, test an alternative driver, quantify the swing, and check for corroborating red flags.
What Is Purchase Price Allocation (PPA)? Goodwill, Step-Ups, and Why It Matters
What is purchase price allocation? PPA explained: how the price splits into fair value step-ups, identifiable intangibles and residual goodwill. Jetzt üben.
How to Answer a Purchase Price Allocation (PPA) Interview Question
A quick refresher on answering a PPA interview question: the allocation sequence, the goodwill plug and the deferred tax step, in brief. Jetzt üben.
Cases
Financial Distress Balance Sheet Analysis of a Company
Financial distress occurs when a company struggles to meet its financial obligations, often due to declining revenues, high debt levels, or poor liquidity. In this case study, you will analyze a company’s balance sheet and key financial ratios to assess whether it is at risk of bankruptcy and what steps it could take to improve its financial position.
Balance Sheet Optimization & Financial Engineering: Strategic Capital Structure Management
A well-optimized balance sheet is critical for corporate stability, financial flexibility, and shareholder value maximization. In this case study, you will analyze Company Z’s financial position, evaluate its capital structure, liquidity, and leverage, and propose strategic solutions for balance sheet optimization. The focus will be on debt restructuring, asset management, shareholder value strategies, and financial engineering techniques, providing insights relevant for investment banking and corporate finance professionals.
Walk Me Through the Income Statement
Walk me through the income statement.
Walk Me Through the Balance Sheet
Walk me through the balance sheet.
Walk Me Through the Cash Flow Statement
Walk me through the cash flow statement.
Connect the Three Statements
Walk me through how the three financial statements connect to each other.
3-Statement Change: Depreciation Increases by $100
Walk me through what happens across the income statement, cash flow statement, and balance sheet if Depreciation & Amortization increases by $100 for the year, with everything else held constant.
3-Statement Change: Revenue Increases by $100
Walk me through what happens across the income statement, cash flow statement, and balance sheet if Revenue increases by $100 for the year, assuming the extra revenue flows through at a 40% margin, with everything else held constant.
3-Statement Change: Buy $100 of Inventory for Cash
Walk me through what happens across the income statement, cash flow statement, and balance sheet if a company buys $100 of inventory for cash, with everything else held constant.
3-Statement Change: Take Out a $100 Loan
Walk me through what happens across the income statement, cash flow statement, and balance sheet if a company takes out a $100 loan, first at the moment the loan is issued and then over the following year as it accrues interest, with everything else held constant.
3-Statement Change: Buy Equipment for $100 Cash
As a financial analyst, you are asked to walk through how a company's three financial statements change when it purchases $100 of equipment for cash — first at the moment of purchase, and then in the following period once depreciation begins.
3-Statement Change: Accounts Receivable Increases by $50
As a financial analyst, you are asked to walk through how a company's three financial statements change when it recognizes a $50 sale on credit — with revenue booked immediately, but the cash from the customer not collected until a later period.
3-Statement Change: Pay a $50 Dividend
Walk me through what happens across the income statement, cash flow statement, and balance sheet if a company pays a $50 dividend, with everything else held constant.
3-Statement Change: Issue $100 of Stock
Walk me through what happens across the three financial statements when a company issues $100 of new stock for cash.
3-Statement Change: Capitalize vs. Expense $100
Walk me through what happens across the income statement, cash flow statement, and balance sheet if a company spends $100 and chooses to either expense it immediately or capitalize it and depreciate it over 5 years, with a 25% tax rate and everything else held constant.
3-Statement Change: Write Down Goodwill by $100
Walk me through what happens across the income statement, cash flow statement, and balance sheet if a company recognizes a $100 Goodwill impairment that is not deductible for tax purposes, with a 25% tax rate and everything else held constant.
3-Statement Change: Customer Pays Upfront (Deferred Revenue)
As a financial analyst, you are asked to walk through how a company's three financial statements change when a customer pays $100 upfront for a service that has not yet been delivered, with revenue deferred until the service is performed.
EBITDA Bridge from Net Income
Starting from Net Income, walk me through every add-back needed to get to EBITDA — and explain why each one belongs there.
EBITDA Normalization
As a financial analyst preparing a sell-side quality-of-earnings analysis, you are tasked with normalizing a company's reported EBITDA by stripping out non-recurring items, to determine the Adjusted EBITDA a buyer should actually pay for.
Goodwill: Creation and Impairment
Walk me through how goodwill is created in an acquisition, when a company needs to write it down, and what happens across the financial statements when it does.
IFRS 16: Lease Accounting
As an accounting analyst, walk me through how IFRS 16 changes the accounting for an operating lease — specifically, how does the lease get recognized on the balance sheet, and what happens to the company's EBITDA and leverage ratios?
Deferred Taxes
Walk me through how deferred tax assets and deferred tax liabilities arise, and tell me which one you'd record when a company recognizes an expense for book purposes before it's deductible for tax purposes.
Free Cash Flow from the Statements
As an analyst, walk me through how you'd calculate a company's Unlevered Free Cash Flow starting from Net Income and using the three financial statements — what do you add back, what do you subtract, and why?
Stock-Based Compensation
Walk me through how stock-based compensation (SBC) affects the income statement, the cash flow statement, and dilution in equity value — and explain why it matters when valuing a company.
Working Capital Deep Dive
Current assets vs. liabilities, the cash cycle, when NWC is a source vs. use
Off-Balance-Sheet Financing: SPVs and Synthetic Leases
As a credit analyst, you are asked to identify a company's off-balance-sheet financing arrangements — such as special purpose vehicles (SPVs) and synthetic leases — and reclassify them onto the balance sheet to reveal the company's true leverage.
Revenue Quality Assessment
As a credit or equity research analyst, you are asked to assess the quality of a company's reported revenue growth — identifying signs such as channel stuffing and bill-and-hold arrangements — and calculate a quality-adjusted revenue figure that better reflects the company's sustainable, economic performance.
Earnings Quality: Red Flags
You're reviewing two years of financial statements for a company whose net income has been growing steadily. Walk me through how you'd assess the quality of those earnings — using the accruals ratio, the divergence between free cash flow and net income, and any other signals — to determine whether the reported profit growth is trustworthy or a red flag.
Lease Accounting Across Sectors: Why IFRS 16 Hits Differently by Industry
As a credit analyst, you are tasked with comparing how IFRS 16 lease capitalization affects leverage metrics differently across three companies in different sectors — an airline, a retailer, and a telecom operator — each with very different lease profiles, and explaining why the balance sheet and leverage impact is not uniform across sectors even though all three follow the same accounting standard.
Purchase Accounting After an Acquisition
As an M&A analyst, you are tasked with walking through the purchase accounting for an acquisition — calculating the fair value step-ups, the deferred tax liability they create, the resulting goodwill, the incremental amortization burden, and the deferred revenue haircut's impact on post-close revenue.
Pension Accounting: PBO, Plan Assets, and the Corridor Method
You're reviewing a company's defined benefit pension plan. Walk me through how the plan's obligation and assets roll forward for the year, what funded status that leaves the company with, how the pension expense recognized in the income statement is calculated using the corridor method, and how you'd adjust the company's leverage and WACC to reflect the plan's net liability.
Footnote Analysis & Segment Reporting
You're reviewing a diversified company's segment footnote disclosure. Walk me through how you'd assess whether management's corporate cost allocation across segments is distorting each segment's true profitability, identify which segment might be quietly loss-making once allocations are stripped out, and explain what other footnote-level quality tells you'd look for before trusting the reported segment margins.
Purchase Price Allocation (PPA)
As a junior M&A analyst, you are tasked with performing the purchase price allocation (PPA) for a recent acquisition — determining how much of the purchase price creates goodwill versus fair value step-ups, and quantifying the amortization burden those step-ups place on the combined company's future earnings.