Financial Reasoning Tests

A financial aptitude test, or financial reasoning test, is an assessment typically given to candidates applying for jobs at financial firms or in-house roles in finance. The financial reasoning test requires the test-taker to have experience and qualifications within finance as they will need to understand the test's terminology and how to analyse documentation.

The tests are typically sent to candidates during the early stages of the recruitment process to help shortlist applicants (usually those who achieve a score within the top 50%).

Financial reasoning tests will often be packaged with other aptitude tests such as numerical reasoning, logical reasoning and diagrammatic reasoning. In HR these are referred to as pre-screening tests which help employers reduce bias in their hiring process and ensure they recruit the best talent.

Pre-employment tests like financial reasoning are being commonly used by HR managers as part of their recruitment process to easily eliminate unqualified or uncommitted candidates.

It also is an efficient way to identify top performers and remove bias from the shortlisting process as the selection is based on data. Some systems even use a method called “blind hiring”; which refers to not being able to see details about a candidate such as their name or university.

When HR teams receive applications, it is difficult to know from just reading a CV or application form whether or not a candidate has the actual skills required for the role. Not only does a test help identify candidates who are most suited for the position, but it also saves teams time and money

This is why it is so important to practice pre-employment tests and understand a company's recruitment process beforehand. Financial roles in particular, commonly use financial reasoning tests and other pre-employment assessments to assess their talent pool.

Financial reasoning tests follow a multiple-choice format. You will be given 4 answers - 1 correct answer and 3 distractors that you must select within a minute time period per question.

The questions describe a scenario that contains extracts of different numerical data (text passages are typically 150-300 words). To find the correct answer you must use your reasoning skills to filter and extract the financial information quickly and effectively.

The test is timed so not only are you being tested on your financial reasoning skills but it also helps employers get a sense of how you work under pressure - although you are typically given more time to answer than a numerical reasoning test and the questions are longer and account for longer reading time.

What can make these tests particularly challenging is the terminology used within the text passages. Words like “market capitalisation” and “profit margin” are typically used within the finance industry and might make the test more challenging if you don't know what they mean.

Financial reasoning tests will also assess your skills and abilities to calculate elaborate mathematical problems in the context of finance compared to what is expected within a numerical reasoning test.

Accounting firms and banks are the most common types of companies that use financial reasoning tests although any company that requires in-house financial skills might use financial reasoning tests.

These top companies will require you to take a range of aptitude tests to ensure they are fairly shortlisting candidates and that applicants have the skills necessary to succeed in the different roles.

Tip 1: Research the publisher of your test

It can be helpful to know who the publisher of your financial reasoning test is to help understand more detail and information about your test format and how to best prepare. It is recommended to email the company you're applying for to get this information.

Tip 2: Revise your financial terminology

Financial reasoning tests use lots of financial terminologies. To reduce the complexity of the questions it can be an advantage to revise different financial phrases and terms that might be related to your role so you can go into the test with confidence.

Tip 3: Practice lots of financial reasoning tests

One of the best ways to build confidence and improve your test score is to practice lots of financial reasoning tests. This will help you get used to the format and structure of the test and help you prepare to answer the questions effectively.

It's also a good indicator of what your skill level is as you will get test mark scores back which you can use to improve on.

Tip 4: Use timed conditions

Financial reasoning tests are timed assessments, so it's important that any practice tests you do are sat under timed conditions - you need to become comfortable with the time pressures and get used to answering questions quickly.

Tip 5: Sharpen your maths skills

Financial reasonings tests can require calculations to be made using quick maths. It is therefore important to sharpen your math skills to ensure you are as prepared as possible.

Q1) What was the total expenditure of mining and logistics in Year 1?

Year 1: £3,400,000

Year 2: £4,000,000

A) £1,258,000

B) £1,292,000

C) £1,326,000

D) £1,462,000

Q2) Approximately, how many extra Canadian Dollars would you get if you swapped 350 UK Pounds rather than 200 US Dollars?

A) 478

B) 488

C) 498

D) 508

Solutions

Q1)

Mining + Logistics = 19% + 18% = 37% 37% = 0.37 0.37 × 3,400,000 = ​A) £1,258,000

Q2)

1 Canadian Dollars = 0.5 UK Pound 350 / 0.5 = 700 We need to find 350 UK Pounds so multiply both sides by 700 700 Canadian Dollars = 350 UK Pound

1 Canadian Dollars = 0.94 US Dollars 200 / 0.94 = 212 We need to find 200 US Dollars so multiply both sides by 212 212 Canadian Dollars = 200 US Dollars

Difference: 700 – 212 = B) 488