Sample interview questions: How do you approach conducting financial feasibility studies for potential investment opportunities?
Sample answer:
Approach to Financial Feasibility Studies
- Define Project Scope: Clearly outline the investment opportunity’s objectives, deliverables, and key assumptions.
- Conduct Market Analysis: Analyze industry trends, competitive landscape, target market, and potential market share.
- Estimate Revenue and Expenses: Forecast revenue streams, operating expenses, capital expenditures, and depreciation schedule.
- Calculate Financial Metrics: Determine profitability (e.g., net income, gross margin), liquidity (e.g., cash flow, working capital), and solvency (e.g., debt-to-equity ratio).
- Identify Key Metrics: Highlight metrics that are crucial to the investment’s success and establish monitoring guidelines.
- Determine Financing Needs: Assess potential funding sources, debt capacity, and equity requirements.
- Conduct Sensitivity Analysis: Perform simulations to test the impact of varying assumptions on key financial metrics.
- Assess Investment Criteria: Read full answer