Accounting
Articles
Working Capital: Bedeutung & Berechnung
Understanding the Balance Sheet (Bilanz) Under HGB – A Comprehensive Guide
What is a Bilanz (German balance sheet)? A clear breakdown of the HGB balance sheet structure — Aktiva, Passiva, equity, and key differences from IFRS.
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 lower Net Income but raise Cash Flow from Operations? A clear walkthrough of the D&A tax shield and how it flows through all three financial statements.
How to Answer the '3-Statement Depreciation Change' Interview Question
How to answer the classic 'what happens if Depreciation increases by $100' interview question: a step-by-step structure covering EBIT, Net Income, cash flow, and the balance sheet.
Why Does Net Income Rise But Cash Flow Fall When Revenue Grows?
When Revenue increases, Net Income and Cash Flow can move in opposite directions. Here's the Accounts Receivable mechanism that explains why — with a full worked example.
How to Answer the '3-Statement Revenue Increase' Interview Question
A step-by-step framework for the classic 'Revenue increases by $100' interview question — covering the margin assumption, EBIT, Net Income, cash flow, and the balance sheet check.
Does Buying Inventory Affect the Income Statement? Here's What Actually Happens
Buying inventory for cash doesn't touch the income statement — it's an asset swap. See exactly what happens to the balance sheet and cash flow statement instead.
3-Statement Interview Question: How to Answer 'Buy Inventory for Cash' Step by Step
A step-by-step framework for answering the classic 3-statement change interview question about buying inventory for cash, plus common follow-ups to expect.
How Does Taking Out a Loan Affect the 3 Financial Statements?
Taking out a loan hits the balance sheet immediately but the income statement only later, through interest. Here's the two-stage mental model interviewers expect.
How to Answer the '$100 Loan' 3-Statement Interview Question
A step-by-step framework for the classic $100 loan 3-statement question, including the after-tax interest shield most candidates forget to mention.
Does Buying Equipment for Cash Affect the Income Statement? Here's What Actually Happens
Buying equipment for cash doesn't touch the income statement at first — it's a CapEx asset swap. See what changes on the balance sheet and cash flow statement, and when depreciation kicks in.
3-Statement Interview Question: How to Answer 'Buy Equipment for Cash' Step by Step
A step-by-step framework for the '3-statement change: buy equipment for cash' interview question — covering the balance sheet, cash flow statement, and the depreciation phase that follows.
Why Does Net Income Rise But Cash Flow Fall When Accounts Receivable Increases?
A $50 credit sale boosts Net Income immediately, but cash doesn't follow until the customer pays. Here's the accrual accounting mechanic behind the gap.
3-Statement Interview Question: How to Answer 'Accounts Receivable Increases by $50' Step by Step
A step-by-step framework for answering the Accounts Receivable 3-statement interview question out loud, from the Income Statement through the Balance Sheet check.
Why Dividends Don't Show Up on the Income Statement
Dividends never touch Net Income - here's why, how they flow through Retained Earnings and the Cash Flow Statement instead, and what interviewers listen for.
3-Statement Impact Questions in Interviews: A Step-by-Step Approach
A repeatable method for answering '3-statement impact' interview questions, applied to a dividend payment example - what changes, what doesn't, and the mistakes that give candidates away.
What Happens When a Company Issues Stock? The 3-Statement Impact
Issuing stock raises cash but never touches the income statement. Here's exactly how a $100 stock issuance flows through the balance sheet and cash flow statement.
How to Answer '3-Statement Change' Interview Questions (Stock Issuance Example)
3-statement change questions come up in nearly every finance interview. Use this repeatable framework, applied to a $100 stock issuance, to handle any version of the question.
Capitalize vs. Expense: What It Means and Why It Moves EBITDA, Net Income, and Cash Flow
Understand the difference between capitalizing and expensing a cost, and why the choice changes EBITDA, EBIT, Net Income, and cash flow in a finance interview.
How to Answer 'Capitalize or Expense?' in a Finance Interview (Step-by-Step)
A step-by-step framework for answering capitalize-vs-expense interview questions, with a worked $100 example showing the EBITDA, Net Income, and cash flow impact.
Why Doesn't a Goodwill Impairment Increase Cash Flow? The Missing Tax Shield Explained
Goodwill impairment lowers Net Income but not Cash Flow from Operations — unlike Depreciation, it usually creates no tax shield at all. Here's the mechanic, explained.
How to Answer the '3-Statement Goodwill Impairment' Interview Question
A step-by-step framework for the '3-statement Goodwill impairment' interview question — including the tax-treatment twist most candidates get wrong.
What Is Deferred Revenue? A Finance Interview Guide
Deferred revenue trips up candidates in 3-statement interview questions. Learn what it is, why it's a liability, and how it moves through the cash flow statement.
How to Answer the 'Customer Pays Upfront' 3-Statement Interview Question
A step-by-step framework for the classic deferred revenue 3-statement question: customer pays $100 upfront for a service not yet delivered. Walk through Income Statement, CFO, and Balance Sheet.
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)
What deferred tax assets and liabilities are, why book and tax income diverge, and how to tell a DTA from a DTL — with a plain-English guide for finance interviews.
How to Answer a Deferred Tax Interview Question (Step by Step)
A step-by-step framework for answering deferred tax interview questions, including the DTA vs DTL direction rule, the formula, and a worked example.
What Is Free Cash Flow? Unlevered vs. Levered FCF Explained
Free Cash Flow (FCF) explained for finance interviews: what it measures, how Unlevered FCF differs from Levered FCF, and why the distinction matters for DCF valuation.
How to Calculate Free Cash Flow from Net Income (Interview Walkthrough)
A step-by-step interview walkthrough for calculating Unlevered Free Cash Flow starting from Net Income: which line items to add back, subtract, and how to structure a confident verbal answer.
What Is Stock-Based Compensation (SBC) and Why Does It Matter for Valuation?
A clear explainer of stock-based compensation: how SBC hits the income statement, why it's added back on the cash flow statement, and why ignoring dilution overstates valuation.
How to Calculate the Cash Flow and Dilution Impact of Stock-Based Compensation (Interview Walkthrough)
Step-by-step: how to calculate SBC's effect on EBIT, Cash Flow from Operations, and Diluted EPS — the exact structure interviewers expect in an accounting or valuation case.
What Is Net Working Capital? Cash Conversion Cycle Explained
A clear breakdown of net working capital and the cash conversion cycle (DSO, DIO, DPO) — what they measure, how they connect, and why interviewers care.
How to Calculate Working Capital in an Interview (DSO, DIO, DPO Walkthrough)
A step-by-step method for answering working capital interview questions: calculating DSO, DIO, DPO, the cash conversion cycle, and the source-vs-use conclusion.
What Is Off-Balance-Sheet Financing? SPVs and Synthetic Leases Explained
Off-balance-sheet financing lets companies borrow through SPVs and synthetic leases without the debt showing up on their balance sheet. Here's how it works and why it distorts leverage.
How to Answer an Off-Balance-Sheet Financing Interview Question
A step-by-step framework for answering SPV and synthetic lease interview questions: how to test for consolidation, reclassify debt, and recompute leverage.
What Is Revenue Quality? Channel Stuffing, Bill-and-Hold, and Other Red Flags Explained
A plain-English guide to revenue quality: what channel stuffing and bill-and-hold accounting are, why rising Days Sales Outstanding (DSO) is a warning sign, and how analysts adjust reported revenue.
How to Answer a Revenue Quality Assessment Interview Question
A step-by-step approach for answering revenue quality interview questions: what to check first, how to calculate DSO, and how to build a quality-adjusted revenue figure under pressure.
What Is Earnings Quality? The Accruals Ratio and the Red Flags That Signal It's Slipping
A plain-English guide to earnings quality: what the accruals ratio measures, why net income and free cash flow can diverge, and the auditor signals worth checking before trusting a profit trend.
How to Answer an Earnings Quality Interview Question: Accruals Ratio Walkthrough
Step-by-step: how to calculate the accruals ratio and cash conversion ratio in an interview, structure your answer, and what a strong candidate says versus a weak one.
Why IFRS 16 Hits Airlines, Retailers, and Telecoms Differently
IFRS 16 capitalizes all leases the same way, but the leverage impact varies hugely by industry. See why lease term matters as much as payment size.
How to Answer 'Why Does IFRS 16 Affect Industries Differently?' in an Interview
A step-by-step framework for answering the IFRS 16 cross-sector interview question, with a worked airline vs. retailer vs. telecom example.
What Is Purchase Accounting? Goodwill, Step-Ups, and the Deferred Revenue Haircut Explained
A plain-English guide to purchase accounting (ASC 805 / IFRS 3): how fair value step-ups, deferred tax liabilities, goodwill, and the deferred revenue haircut work after an M&A deal closes.
How to Answer a Purchase Price Allocation Interview Question (Step-by-Step Framework)
A step-by-step framework for answering purchase accounting and purchase price allocation interview questions, with a worked goodwill and deferred tax liability example.
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
A plain-English guide to purchase price allocation in M&A: how goodwill and fair value step-ups are created, why goodwill isn't amortized, and how PPA flows through the financial statements.
How to Answer a Purchase Price Allocation (PPA) Interview Question
A step-by-step framework for answering PPA interview questions: computing fair value step-ups, goodwill, and the earnings impact of incremental D&A — with the tax nuance interviewers listen for.
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.