Top 44 Financial Services Interview Questions You Must Prepare 14.Jun.2024

  1. Banks
  2. Mutual savings banks
  3. Savings banks
  4. Building societies
  5. Credit unions
  6. Financial advisers or brokers
  7. Insurance companies 

  1. Intangibility
  2. Customer oriented
  3. Perishable in nature
  4. Inseparable
  5. Direct sale
  6. Labor intensive

  1. Optimum utilization of resources
  2. Technical assistance
  3. Economic development
  4. Improves standard of living
  5. Improves balance of payment
  6. International Relationship

International factoring is an ingenious and relatively simple concept. Factoring serves as export insurance. Factors, usually working for a factoring company, guarantee the import price of goods to the exporter. It is the exporter who hires the factor. The factor is totally responsible for the cash flow from the importer to the exporter. In essence, credit is outsourced to the factor company.

  1. Processing fees
  2. Legal and documentation charges
  3. Insurance charges
  4. Fine for default in payment of installation
  5. Technical charges

Importance of Financial Services:

  1. Vibrant Capital .
  2. Expands activities of financial s.
  3. Benefits of Government.
  4. Economic Development.
  5. Economic Growth.
  6. Ensures Greater Yield.
  7. Maximizes Returns.
  8. Minimizes Risks. 

A bill is a promissory note drawn by seller from buyer which undertakes liability to pay certain amount to bearer or specified person on or after maturity period.

  1. Industrial Development Bank of India[IDBI]
  2. Tata Home Finance
  3. LIC Housing Finance
  4. State Bank of India
  5. Bank of Punjab 

  1. The hire purchaser becomes the owner of the asset after paying the last instalment.
  2. Every instalment is treated as hire charge for using the asset.
  3. Hire purchaser can use the asset right after making the agreement with the hire vendor.
  4. The hire vendor has the right to repossess the asset in case of difficulties in obtaining the payment of instalment.

The art of selecting the right investment policy for the individuals in terms of minimum risk and maximum return is called as portfolio management.

Portfolio management refers to managing an individual's investments in the form of bonds, shares, cash, mutual funds etc so that he earns the maximum profits within the stipulated time frame. Portfolio management refers to managing money of an individual under the expert guidance of portfolio managers.

Factoring is a financial traction and a type of debtor finance in which a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount. A business will sometimes factor its receivable assets to meet its present and immediate cash needs. Forfaiting is a factoring arrangement used in international trade finance by exporters who wish to sell their receivables to a forfaiter. Factoring is commonly referred to as accounts receivable factoring, invoice factoring, and sometimes accounts receivable financing.

Venture capital has the following features: 

  1. Venture capital investments are made in innovative projects.
  2. Benefits from such investments may be realized in the long run.
  3. Suppliers of venture capital invest money in the form of equity capital.
  4. As investment is made through equity capital, the suppliers of venture capital participate in the management of the company.

  1. Capital lease
  2. Operating lease
  3. Sale and lease back
  4. Leveraged lease
  5. International lease
  6. Domestic lease 

Method of export trade financing, especially when dealing in capital goods or with high risk countries. In forfeiting, a bank advances cash to an exporter against invoices or promissory notes guaranteed by the importer's bank. The amount advanced is always 'without recourse' to the exporter, and is less than the invoice or note amount as it is discounted by the bank. The discount rates depends on the terms of the invoice/note and the level of the associated risk.

Business expertise: Aside from the financial backing, obtaining venture capital financing can provide a start-up or young business with a valuable source of guidance and consultation. This can help with a variety of business decisions, including financial management and human resource management.

Additional resources: In a number of critical areas, including legal, tax and personnel matters, a VC firm can provide active support, all the more important at a key stage in the growth of a young company. Faster growth and greater success are two potential key benefits.

Connections: Venture capitalists are typically well connected in the business community. Tapping into these connections could have tremendous benefits.

A merger occurs when two firms, usually equal in size decide to continue business as a single firm rather than being owned and operate as separate entities. In order for a merger to happen, both companies should surrender their stocks so that a new company can be formed and new stock can be issued.

In an acquisition, one company will purchase the other. In an acquisition, the company that acquires the target company will be entitled to target company's all the assets, properties, equipment, offices, patents, trademarks, etc. The acquirer will either pay in cash to acquire the firm or provide shares in the acquirer's firm as compensation. 

Hire-purchase system is a special system of purchase and sale of goods. Under this system purchaser pays the price of the goods in instalments. The instalments may be annual, six monthly, quarterly, monthly fortnightly etc. Under this system the goods are delivered to the purchaser at the time of agreement before the payment of instalments but the title on the goods is trferred after the payment of all instalments as per the hire-purchase agreement.

  1. Financing of an asset through hire purchase is very easy.
  2. Hire purchaser becomes the owner of the asset in future.
  3. Hire purchaser gets the benefit of depreciation on asset hired by him/her.
  4. Hire purchasers also enjoy the tax benefit on the interest payable by them.

  1. Facilitate liquidity
  2. Reduces the risk
  3. Expertise services
  4. Maximize profitability
  5. Time saving 

Financial services can be defined as the products and services offered by institutions like banks of various kinds for the facilitation of various financial tractions and other related activities in the world of finance like lo, insurance, credit cards, investment opportunities and money management as well as providing information on the stock  and other issues like  trends. Fee based financial services are those which are paid for a flat fee rather than commission.

Venture capital is financing that investors provide to start up companies and small businesses that are believed to have long-term growth potential. For start ups without access to capital s, venture capital is an essential source of money. Risk is typically high for investors, but the downside for the start up is that these venture capitalists usually get a say in company decisions.

  1. It is very costly.
  2. In factoring there are three parties: The seller, the debtor and the factor.
  3. It helps to generate an immediate inflow of cash.
  4. Here the full liability of debtor has been assumed by the factor.
  5. Factor has the right to take any legal action required to recover the debts. 

Loan syndication is the process of involving several different lenders in providing various portions of a loan. Loan syndication most often occurs in situations where a borrower requires a large sum of capital that may be too much for a single lender to provide or outside the scope of a lender's risk exposure levels. Thus, multiple lenders work together to provide the borrower with the capital needed.

  • Rationalization of your balance sheet
  • Securing financing at prevailing  interest rates
  • Achieving flexible terms that meet the requirements of your cash flow plan, etc.
  • Managing your funds efficiently
  • Unifying the terms of tractions with financial institutions
  • Securing liquidity

  • Domestic Factoring
  • International Factoring

  1. Borrower
  2. Lead arranger
  3. Agent
  4. Participating Bank

Lease is a financial contract between the business customer (user) and the equipment supplier (normally owner) for using a particular asset/equipment over a period of time against the periodic payments called Lease rentals.

Hire Purchase is a kind of installment purchase where the businessman (hirer) agrees to pay the cost of the equipment in different installments over a period of time. This installment covers the principal amount and the interest cost towards the purchase of an asset for the period the asset is utilized.

  1. Bill discounting is always of recourse type while factoring can be either with or without recourse. In case of recourse the factor does not assume the credit risk and it is the company which assumes the credit risk. 
  2. Factoring is an off balance sheet entry in the sense that both amount of receivables and bank credit are not shown in the balance sheet which is not the case with the bill discounting which is shown in the balance sheet.
  3. In bill discounting there is only provision of finance while in factoring factor provides in addition to finance facility other facilities like sales ledger maintenance, collection etc..
  4. Discounted bills may be re-discounted several times before they mature for payment which is not the case with factoring.

Written or implied contract by which an owner of a specific asset such as a parcel of land, building, equipment, or machinery grants a second party the right to its exclusive possession and use for a specific period and under specified conditions, in return for specified periodic rental or lease payments.

The types of Domestic factoring are discussed below:

  1. Recourse Factoring
  2. Non-Recourse Factoring
  3. Advance Factoring
  4. Confidential and Undisclosed Factoring
  5. Maturity Factoring.
  6. Supplier Guarantee Factoring
  7. Bank Participation Factoring 

  1. Investors make informed decision
  2. Improves business performance
  3. Equitable use of resources
  4. Align objectives with goals
  5. Monitors all business processes

Merger refers to combining of two or more company and forming new company. Two or more company merge to form one new company is called as merger. 

An arrangement in which a lender gives money or property to a borrower, and the borrower agrees to return the property or repay the money, usually along with interest, at some future point in time. Usually, there is a predetermined time for repaying a loan, and generally the lender has to bear the risk that the borrower may not repay a loan.

  1. Tax benefits
  2. Alternative use of funds
  3. Boon to small firms
  4. Flexibility of payment
  5. Protect against obsolescence
  6. Leasing is faster and cheaper credit

Debt restructuring:Debt restructuring is the process of reorganizing the whole debt capital of the company. It involves reshuffling of the balance sheet items as it contains the debt obligations of the company.??A company??s financial manager needs to always look at the options to minimize the cost of capital and improving the efficiency of the company as a whole which will in turn call for the continuous review of the debt part and recycling it to maximize efficiency.

Equity restructuring:Equity restructuring is the process of reorganizing the equity capital. It includes reshuffling of the shareholders capital and the reserves that are appearing in the balance sheet. Restructuring of equity and preference capital becomes a complex process involving a process of law and is a highly regulated area.

Financial Services is a term used to refer to the services provided by the finance . Financial Services is also the term used to describe organizations that deal with the management of money. Examples are the Banks, investment banks, insurance companies, credit card companies and stock brokerages.

  1. Horizontal Merger
  2. Vertical Merger
  3. Conglomerate Merger
  4. Acquisition

  • Equity participation
  • Conventional loan
  • Conditional loan
  • Income notes 

  1. The lessee gets only the right to use the asset. In case the leasing company is wound up the asset may be taken back from the lessee thereby disrupting his operations.
  2. The lessee cannot make alterations or improvements in the asset without the prior approval of the lessor. The lessor may also put some restrictions on the lessee.
  3. The lessee has to pay lease rentals on a regular basis to the lessor.

Housing finance brings together complex and multi-sector issues that are driven by constantly changing local features, such as a country's legal environment or culture, economic makeup, regulatory environment, or political system.

The purpose of a housing finance system is to provide the funds which home-buyers need to purchase their homes. This is a simple objective, and the number of ways in which it can be achieved is limited. Notwithstanding this basic simplicity, in a number of countries, largely as a result of government action, very complicated housing finance systems have been developed. However, the essential feature of any system, that is, the ability to channel the funds of investors to those purchasing their homes, must remain.

  1. Ownership of asset is trferred only after the payment of the last installment.
  2. The magnitude of funds involved in hire purchase are very small and only small types of assets like office equipment's, automobiles, etc., are purchased through it.
  3. The cost of financing through hire purchase is very high.

  1. Single or direct factoring system
  2. Direct export factoring
  3. Direct import factoring
  4. Back to back factoring 

Domestic factoring me purchase, funding, management and collection of short term accounts receivable arising from supply of goods and services to domestic buyers. Goods are delivered on open account credit terms up to 180 days.