4 Myths about finance interview at campus placements

It’s that time of the year when campuses are filled with corporate executives teeming into the campus. Nervous students, energetic placement committee folks and enthusiastic HR folks from corporates are all looking to find common spots where they can connect and hopefully establish a working relationship for all. This year all this action is virtual so the challenges are higher and more complex.

On campus a variety of companies drop in for finance placements. These could be either front office banking jobs, investment banking, equity research, credit ratings, corporate finance, global development centers of large investment banks or finance jobs with companies. Whatever the job profile there are a few myths that need to be demystified before going for the interview:

MYTH 1 – You sound smart by quoting Warren Buffet or Charlie Munger

Not at all! Just because you memorized a few of these legendary quotes, it makes no sense to quote them when you are speaking to the CFO or the HR head at the interview. It just demonstrates that you have memorized these only for the interview

MYTH 2 – You will be selected because you know all the formulae for financial ratios

Again blast that myth off!! I have seen many eager to please students rambling out ratio formulae, but when an interviewer asks a simple question like “What is current ratio”, he doesn’t want to hear what is the formula for that. He knows the formula, he knows that you know the formula. What will impress him is your interpretation of the ratio. Talk about the issues surrounding current assets and what liquidity problems could arise, if companies had too high levels of current ratio.

MYHT 3 – Debt is bad for the company and equity is a better option

Not really! Companies use an optimal mix of debt and equity in their capital structure and depending upon the tax status of the company and the macro interest rate cycle, debt is cheaper than equity. Do not make the mistake of making absolute sweeping statements that sound prophetic but are rarely true

MYTH 4 – High risk generates high returns, low risk gives low returns

If that’s true then we all should go to Las Vegas and gamble our fortunes. Take high risk at the roulette table and you will get high returns. I love this myth because its absolutely untrue. High risk leads to expected high returns. There is an expectation of high returns and there is no guarantee of high returns.

Whatever the question, remember you need to display analytical skills and understanding of the problem at hand. As a fresher, you are not yet finance Guruji, but you are smart and logical. That’s what works at the campus finance interview.

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