SIEMENS INTERVEIW (2nd round) Set- 2

3 Financial Statements

Income statement- Rev - Expense = Net income

Shows your profit over a period of time

Balance Sheet- Assets= L + E

Shows at one point in time

Cash flow- shows cash generated and used by operating, investing, and financing activities

Operating expense-

Investing expense-

Financing expense-

O: Payroll, overhead, advertising, supplies, maintenance, Insurance, Depreciation

I: equipment, land, furniture

F: interest, loan, fees, bonds, cash dividends

How are the 3 statements connected?

Net income from the income statement flows into retained earnings on the balance sheet and is the starting point for the indirect cash flow statement.

The cash flow statement explains the change in cash, which appears on the balance sheet.

Together, the three statements help us understand profitability, financial position and liquidity.”

What is the difference between profit and cash flow?

Profit measures revenue- expenses

cash flow measures the actual movement of cash into and out of a business.

Revenue increased, but profit decreased. How do you investigate?

“I would start by comparing actual results with the budget and the prior period, then break down the change in profit into its main drivers.

How do you asses the financial health of a business?

• Profitability: Revenue growth, gross margin and operating margin.

• Liquidity: Current ratio, quick ratio and operating cash flow.

• Solvency: Debt levels, interest coverage and the ability to meet long-term obligations.

• Efficiency: Inventory turnover, receivables collection and asset utilisation.

What happens to cash flow if we reduce inventory?

Reducing inventory can improve operating cash flow because less cash is tied up in goods held in stock. It can also reduce storage costs, insurance costs and the risk of inventory becoming obsolete.

What is the difference between a budget, forecast and actual results?”

A budget is the financial plan established for a particular period. A forecast is an updated estimate of what the business now expects to happen, based on the latest information. Actual results are what the business has really achieved.

Why is cash flows important if a company is profitable?

You need cash to purchase things like equipment and you can use rev cause sometime that money doesn’t exist yet

What is working capital

Short term goals

Current assets- current liabilities

What is the difference between NPV and IRR

NPV is how much money is being made at a particular rate, and IRR is when NPV is 0

What is NPV

Net present value → the present value of a projects future cash inflows and outflows

Statement of cash flows

Income statement

Balance sheet