Preview Questions Financial Analyst | Role Specific Skill

Question 1: For a financial analyst evaluating a global insurer, which input to a multi-stage dividend discount model (DDM) is most difficult to project accurately due to cross-border regulatory frictions and varying tax regimes?

Which action should you take?

Choose only one option

Long-term dividend growth in home country

Weighted Average Cost of Capital (WACC)

Beta of the insurer's equity relative to a global index

Dividend repatriation policies and associated withholding taxes

Question 2: To assess the performance persistence of a bank's internal asset management unit, which metric would be most appropriate to analyze stability of alpha generation over multiple market cycles?

Which action should you take?

Choose only one option

Sortino ratio compared to a stable bond index

Single period Sharpe ratio against a benchmark

Rolling Jensen's Alpha over multiple 5-year periods

Annualized Information Ratio over 1 year

Question 3: In budgeting for capital expenditures, which approach is typically used in the BFSI sector to forecast future needs?

Which action should you take?

Choose only one option

Incremental budgeting, where each year's budget is adjusted based on last year's expenditure

Top-down budgeting, using historical capital expense data

Bottom-up budgeting, based on individual project estimates

Zero-based budgeting, where all expenses must be justified from scratch

Question 4: How do you account for provisions and contingent liabilities in financial reports for the banking sector?

Which action should you take?

Choose only one option

I account for them as immediate expenses in the profit and loss statement

I disclose them in the notes to the financial statements if the liability is probable, and estimate the amounts

I ignore contingent liabilities as they do not affect the financial statements

I exclude provisions unless they are certain and measurable

Question 5: How should BFSI firms budget for technology upgrades in forecasting models?

Which action should you take?

Choose only one option

Using fixed percentages of revenue

By benchmarking against competitors

Based on historical technology spending trends

Through scenario-based investment analysis

Question 6: When evaluating credit risk for a loan portfolio, what is your approach to assessing default correlation among borrowers?

Which action should you take?

Choose only one option

I use a copula model to assess the joint probability of defaults and adjust for correlation across borrowers

I rely on historical default rates without considering correlation

I use industry averages for default rates without adjusting for portfolio-specific factors

I assume that borrowers' defaults are independent of one another