Advance tax provision?
Advance tax means tax paid in the financial year immediately preceding the A.Y. (i.e., PY) As per section 208, every person whose estimated tax liability for the year is Rs.…
Difference between DRP & CIT(A)?
The DRP is an Alternative Dispute Resolution (ADR) mechanism for resolving disputes related to Transfer Pricing in International Transactions. Appeal can be filed before CIT(A), when an assessee is adversely…
What do you know about internal transfer pricing?
Internal transfer pricing is pricing mechanism of the organisation under which one division of an organisation charges for the product or service transferred to another division of the same organisation…
Why Equalization levy Introduced?
Many online Advertisement portals are non-resident and do not have permanent establishment in India. Many resident assessee make payment to this non-resident for advertisement and claim as business expenditure u/s…
What is DTAA?
Double taxation means the same income getting taxed twice in hands of same assessee. Any country taxes income on baris of two rules i.e. residence rule & source rule Double…
What is Advance Ruling?
An advance ruling refers to the facility of obtaining a judgment in advance from the Authority for Advance Rulings. The facility is used when the assessee has anticipated contentious issues…
Difference between POEM and PE. What are the types of PE?
“Place of effective management” means a place where key management and commercial decisions that are necessary for the conduct of business of an entity as a whole are, in substance…
Roll back provisions in case of merger and demerger?
The agreement is between the Board and a person. The principle to be followed in case of merger and demerger is that the person (company) who makes the advance pricing…
Difference b/w primary and secondary adjustment?
a] Primary adjustment is defined to mean the determination of the transfer price in accordance with the arm’s length principle resulting in an increase in the total income or reduction…
What are the Methods for computing ALP along with examples?
Arm’s Length Price can be computed by the following methods; 1. Comparable Uncontrolled Price Method 2. Resale Price Method 3. Cost Plus Method 4. Profit Split Method 5. Transaction Net…
Difference between Realized and Unrealized gains?
Realized gains refer to profits from completed transactions whereas unrealized gains refer to profits that have materialized, but the transactions have not been completed. Realized gains are the profits earned…
How do you ensure completeness and accuracy of financial statements?
Ensure the accuracy of the data entry process, which involves journal entries of financial transactions and the posting of journal entries to the ledger which can be done by Automated…
What do you mean by debt extinguishment?
Debt extinguishment occurs when a debt instrument is terminated. This occurs when the borrower repays the lender or bonds are retired by the issuer. Extinguishment may not involve full repayment…
What do you understand by debt covenant?
Debt covenants can simply be defined as agreements between the business and the creditors. Under this, the borrowing company is supposed to abide by certain conditions, in order to be…
What is the need for Cash Flow Statements?
So long as you use accrual accounting, cash flow statements are an essential part of financial analysis for three reasons: They show your liquidity. That means you know exactly how…
What are the methods of Cash Flow statement and give at least one example of each activity?
There are two ways to prepare a cash flow statement: the direct method and the indirect method: Direct method – Operating cash flows are presented as a list of ingoing…
Difference between Basic EPS and Diluted EPS?
Basic Earnings Per Share is the ratio, that is reckoned to know the earnings available to each equity share. It is calculated by considering company’s ordinary shares. On the other…
Difference between virtual certainty and reasonable certainty?
Virtual certainty determination is a matter of judgement to be evaluated on a case to case basis , should be supported by convincing evidence, i.e., evidence available at reporting date…
What do you mean by walkthroughs and control testing?
A walkthrough test is an examination of each step involved in a transaction. A transaction is traced right from the beginning to the end to understand the process flow A…
What is MRL and why it is used and who takes it? If not received, then what will be the effect on audit opinion in audit report?
(1) It is a written statement by management provided to the auditor to confirm certain matters or to support other audit evidence. (2) It does not include financial statements, the…
If debtors’ confirmations are not received, then how would you deal with this kind of situation?
We need to perform alternative audit procedures to larger items- By verifying the subsequent cash receipt to see if customers have paid for those invoices that were not confirmed, sales…
If company is having Going concern issue, then as an auditor what are the requirements to bekept in mind while auditing and what will be the impact on audit opinion in audit report?
The auditor should evaluate whether Sufficient and appropriate audit evidence has been obtained and conclude on appropriateness of management use of going concern basis of accounting in preparation of Financial…
How will you recognise revenue in case sale is made on FOB basis and in case of CIF basis? Explain.
A. The recognition of revenue in case of FOB (Free on Board) and CIF (Cost, Insurance and Freight) basis is determined by the point at which the ownership of the…
What is Operating/Financial Leverage?
A. Operating leverage and financial leverage are two types of leverage that refer to how a company uses debt to amplify the returns on its operations or investments. Operating leverage…
All Financial Ratios and profitability ratios.
A. Financial ratios are used to evaluate a company's financial performance and health by comparing different financial metrics. There are many different financial ratios that can be used, but some…
What is negative working capital?
A. Working capital is a measure of a company's short-term liquidity and is calculated as the difference between a company's current assets and its current liabilities. Negative working capital occurs…
How to calculate free cash flows?
A. Free cash flow (FCF) is a measure of a company's cash flow that is available for distribution after accounting for capital expenditures. It is the cash that a company…
What is the most important thing you would look for in annual report while performing due diligence?
A. The most important thing to look for in an annual report while performing financial due diligence is the financial statements, including the income statement, balance sheet, and cash flow…
What is Deferred Revenue? What is its importance in Due diligence.
A. Deferred revenue is a liability that represents revenue that a company has received but has not yet earned. It is revenue that a company has received in advance for…
How will you find Enterprise Value?
A. The enterprise value (EV) of a company is a measure of the total value of a company. It is calculated by adding the market capitalization of the company, the…
What do you mean by EBITDA?
A. EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a measure of a company's financial performance that excludes certain non-cash expenses, such as interest, taxes, depreciation,…
What do you understand by Confidential Information Memorandum?
A. A Confidential Information Memorandum (CIM) is a document that is typically used in the process of selling or raising capital for a business. It is a document that provides…
What do you think is the most important aspect of due diligence?
A. The most important aspect of financial due diligence is to thoroughly review and understand the target company's financial statements, financial performance, and financial position. This includes reviewing historical financial…
While performing Due diligence, what all information would you request?
A. When performing financial due diligence, the information requested will vary depending on the specific circumstances of the transaction, the nature of the business, and the specific areas of concern.…
Define Target working Capital.
A. Target working capital refers to the optimal level of a company's current assets and liabilities that is required to support its ongoing operations and growth. It is the ideal…
What do you understand by QOA (Quality of asset)?
Quality of assets (QOA) refers to the condition, value, and overall performance of a company's assets. It is a measure of the underlying economic value and performance of a company's…
What do you understand by QOE (Quality of earnings)?
Quality of Earnings (QOE) refers to the sustainability, predictability, and stability of a company's earnings. It is a measure of the underlying economic performance of a company, and it is…
What is the most important deliverable for FDD?
The most important deliverable for Financial Due Diligence (FDD) is a comprehensive report that summarizes the findings and conclusions of the FDD process. This report should provide a detailed analysis…
Why there is a need for conducting Financial due diligence?
Financial Due Diligence (FDD) is a process of evaluating the financial and operational aspects of a company or a business before making an investment or a business decision. FDD provides…
What do you understand by FDD?
Financial Due Diligence (FDD) is an examination and analysis of a company's financial information to assess its overall financial health and performance. The purpose of FDD is to gain a…
What is the importance of CIBIL & why it is checked?
CIBIL is also known as the Credit Information Bureau of India Limited. It plays a crucial role in the Indian financial setup. The organisation gathers information and calculates a CIBIL…
Differentiate between Tax planning & Tax evasion?
Tax Evasion: Tax Evasion is an illegal way to minimize tax liability through fraudulent techniques like deliberate under-statement of taxable income or inflating expenses. It is an unlawful attempt to…
Explain the concept of Marginal Relief and how it is calculated. Is there a situation in which there is no marginal relief?
The tax system is progressive in nature i.e., as the income increases, tax also increases. Assessees having higher income than the prescribed limit are required to pay extra amount of…
W.e.f from July 2021 Sec 194Q was introduced where buyer will have to deduct TDS on high value purchase from specific seller. Do you know why such amendment has been made? Discuss regarding the provisions of the section
The Finance Act, 2021, introduced Section 194Q of the Income-tax Act, 1961, which is related to Tax Deducted at Source (TDS) on purchase of goods and not to the provisions…
Have you heard of TDS to be deducted Business or Profession on issuing any advantage/perquisite to individual? If yes then why such introduction is made. Discuss on the applicability
The Finance Act, 2022, introduced Section 194R, which pertains to the deduction of tax on benefits or perquisites in respect of businesses or professions. Businesses, companies, or entities often extend…
What ratios you will look for when giving credit?
Financial Institutions assign a credit score to borrowers after performing due deligence which includes ratio analysis. these are known as lending ratios. Ratios help to define whether borrower will be…
How does the treatment of financing fees differ from transaction fees in an LBO model?
Financial Fees → Financing fees are related to raising debt or the issuance of equity and can be capitalized and amortized over the tenor of the debt (~5-7 years). Transaction…
What is PIK interest?
PIK interest (“paid-in-kind”) is a form of non-cash interest, meaning the borrower compensates the lender in the form of additional debt as opposed to cash interest. PIK interest typically carries…
Name a few warning signs you would watch out for while evaluating a potential investment opportunity in LBO
Industry Cyclicality: A potential LBO contender should produce steady cash flow. Therefore,from a risk perspective, an investment is less appealing when revenue and demand changes arevery cyclical and reliant on…
Which credit ratios would you consider when evaluating a borrower’s financial situation?
Leverage ratios link a company's debt holdings to a particular cash flow indicator, most frequently EBITDA. The financing climate and the industry will have a significant impact on the leverage…
What qualities make a company the perfect candidate for an LBO?
A candidate for an LBO should possess the majority (or all) of the following qualities: A mature industry with a defendable market position, a business model with recurring revenue, a…
What are the main LBO return-generating levers?
1) Deleveraging – As more loan principal is paid down with the help of the cash flows produced by the acquired company, the value of the equity held by the…
What are the private equity firms’ investment exit strategies?
A PE firm will typically monetize their investment in one of the following ways: Sale to a Strategic Buyer: Sales to strategic buyers typically have higher valuations and are more…
What is the basic intuition underlying the usage of debt in an LBO?
Ans. A high percentage of borrowed money is typically used to finance an LBO, and the private equity sponsor contributes just a modest amount of equity to the deal. The…
Walk me through the mechanics of building an LBO model for a financial buying.
Step 1 – Entry Valuation - Calculating the implied entry valuation based on the entry multiple and LTM EBITDA of the target firm is the first step in creating an…
What is a leveraged buyout (LBO) for a PE firm?
An LBO is the purchase of a business, whether it is privately held or publicly listed, in which a sizeable portion of the purchase price is financed by debt. The…
What is a term sheet?
A non-binding agreement that outlines the basic terms & conditions of an investment. It serves as a model for creating more comprehensive, binding documents.
What is equity dilution?
Equity dilution is the reduction in shareholders' stock holdings in a firm. Whenever shareholders provide equity ownership to external investors (like private equity firms) in return of money, it is…
What is Pre-money / post- money valuation?
Pre- Money Valuation - Pre-money valuation is the value of a firm before any outside capital in most recent/proposed round of funding has been added. Pre-money is best defined as…
What are the various stages of funding?
There are 8 Stages of funding given below: • Pre-seed funding stage • Seed funding stage • Series A funding • Series B funding • Series C funding • Series…
What is the difference between Private Equity and Venture Capital?
Capital invested in a business or other entity that is not publicly listed or traded is known as private equity.Private Equity investors prefer to invest in stable companies, whereas Venture…
What is dry powder?
Dry powder is the amount of committed but unallocated capital that a venture capital (VC) or private equity (PE) company has on hand. It is, in other words, a cash…
Difference between strategic buyers and financial buyers?
Strategic buyers must carefully analyse purchases based on how the targets will "tie in" with their existing company and business units since they frequently incorporate the acquired business into a…
Who are the financial buyers?
A financial buyer is a type of acquirer in an M&A that is primarily interested in a buying the company with an intention to sell later at some point, thereby…
Some tips for preparing FP&A Interviews
EXTRA- Few tips for Technical round of interviews in FP&A Since FP&A roles and responsibilities vary from industry to industry, students are advised to have a brief knowledge of the…
What Types of Businesses Use Financial Modeling?
Professionals in a variety of businesses rely on financial modeling. Here are just a few examples: Bankers use it in sales and trading, equity research, and both commercial and investment…
What Is a Hurdle Rate? Why is it important?
A hurdle rate is the minimum rate of return on a project or investment required by a manager or investor. It allows companies to make important decisions on whether or…
How will you carry out a risk-based assessment?
● A risk assessment is a systematic process that involves identifying, analyzing, and controlling hazards and risks. It is performed to determine which measures are, or should be, in place…
What do you mean by matching concept?
Matching concept states that expenses that are incurred in an accounting period should be matching with the revenue earned during that period. Thus, all expenses for that accounting period whether…
What is the use and purpose of Excel Pivot Table, VLOOKUP, HLOOKUP, SUMIF, and Index Match?
● Pivot Table is an interactive way to quickly summarize large amounts of data. It is used to summarize, sort, reorganize, and group. It allows us to extract the significance…
What is the key ratio for measuring profitability?
Key ratios for measuring the profitability of the company are ● Return on Equity ● Gross Profit margin ● Net Profit margin ● Earnings per share
If accounts receivable are going up, what could be the possible driver?
The main reason for the increase in accounts receivable is an increase in credit sales by the company.
What is the key ratio to consider while evaluating a new investment?
Some of the key ratios considered by investors while investing are: ● Price-to-Cash-Flow Ratio ● Debt-to-Equity Ratio ● Quick Ratio ● Price-to-Earnings Ratio
How do MIS Reports Work? Give an example.
MIS reports focus on raw data, trends, patterns in that data, and comparisons with relevant past data. MIS reports are also an effective tool for managers to track business operations…
What is an MIS Report? Mention few types of MIS Reports.
MIS stands for Management Information system. It can be described as a system that provides important information for the management of your company. MIS collaborates with people, technology, and business…
How do you forecast Costs?
Costs and other expenses in a company can be forecasted by any of the following methods: ● Percentage of Revenues ● Costs other than depreciation as a percent of revenues…
How are the 3 financial statements linked together?
The linkage of the 3 financial statements can be described as: ● Financing activities mostly affect the balance sheet and cash from finalizing, except for interest, which is shown on…
How does an inventory write-down affect the Financial statements?
On the balance sheet, the asset account of inventory is reduced by the amount of the write-down, and so is shareholders’ equity. The income statement is hit with an expense…
What is Financial Modeling for FP&A?
In Financial Planning & Analysis (FP&A), the practice of creating financial models is primarily for short to medium-term budgeting, forecasting, and planning at a corporation (or operating company). FP&A teams…
What are the different methods of evaluating a project or investment?
● Payback period: The payback period calculates the length of time required to recoup the original investment. Payback periods are typically used when liquidity presents a major concern. ● Internal…
What is a rolling forecast? How is it different from a traditional budget?
● A rolling forecast is a report that uses historical data to predict future numbers and allows organizations to project future results for budgets, expenses, and other financial data based…
Can you walk us through the P&L and Balance sheet of our company?
Significant aspects to be kept in mind: ● Detailed information on the business of the company ● Major revenue sources ● Operational expenses ● Investments of the company ● Capital…
What are the different ways to analyze data?
● Segmentation- Grouping of data having common attributes. Useful for areas like customer segmentation by customer type, geographical spread, etc. ● Data visualization- which includes graphical representation of the data…
How would you forecast the revenue of our company? Or What are the key drivers or metrics for revenue in our industry?
Have a brief knowledge of: ● Life stage of the company or its products/services ● Impact of government policies ● Recent project(s) launched by the company & its performance ●…
How can you improve profits? Give an example.
A general answer and a structured answer are given below - General Answer: Improving margins and profits is an important goal for any business, and there are several strategies that…
What are the different types of variance commentaries and explain the ones you have worked on
Variance commentaries can be on different aspects of a business such as: ● Costs ● Revenue ● Profit and Loss ● Expenses ● Efficiency In each of the above, the…
What is Driver-Based Planning?
Driver-Based Planning is an approach in which the key business variables which drive a company’s success are identified and used to forecast where the company is heading, with the results…
What are the different types of FP&A reports?
Budget vs. actual: compares actual financial results to budgeted or planned results. Variance analysis: explains the difference between budgeted and actual results. Cash flow: tracks the inflow and outflow of…
What is CAGR? Should CAGR be high or low?
● The compound annual growth rate (CAGR) is the rate of return that would be required for an investment to grow from its beginning balance to its ending balance, assuming…
Variance analysis and Key factor of variance analysis?
● Variance analysis is the actual difference between 2 data points. It is the process of examining each variance in detail and determining the reasons why the budget was not…
What is the difference between Quick Ratio and Current Ratio?
The inclusion of inventory in Current Ratio and its exclusion from the Quick Ratio is the key difference between the two.
What is Assets to Turnover Ratio?
An Asset to Turnover Ratio is an efficiency indicator which shows what multiple is turnover of the total assets employed in a business.
What is the role of Cash Flow?
The role of Cash Flow lies in showing the movement of cash between two points of time. It shows where the cash had come from and where it was utilized.…
What have you learnt from Financial Statement Analysis?
FSA is an extremely important tool for enabling the management to: ▪ Evaluate business performance on all the key parameters such as profitability, solvency, efficiency, and wealth building. ▪ Determine…
Distinguish between long term and short-term debt?
Long term debt may be defined as one which is used to fund the capital of a business. In other words, it is intended to be invested in long term…
What is working capital? How will you calculate it?
Working capital is the excess of current assets over current liabilities. In other words, it is the money invested in those assets of a business which are intended to be…
What is Credit Risk?
Credit risk is the risk taken by a bond investor that the bond's issuer will default by failing to pay interest and repay principal on schedule.
What is Distressed Securities?
A financial instrument in a company that is near or is currently going through bankruptcy. This usually results from a company's inability to meet its financial obligations. As a result,…
What is Credit Crunch?
A sudden drop in the general availability of loans or a sudden increase in the cost of borrowing from banks is known as a credit squeeze.
What is Loan to Value Ratio?
A loan-to-value (LTV) ratio is an equation that lenders use to assess the amount of risk associated with a loan. In other words, how much loan borrower is getting against…