Cash Flow vs Profit Forecast Test | Dataford Interview Questions

Your question is Cash Flow vs Profit Forecast Test. Take a moment with it on the right.

Talk me through your thinking if you like. When you're confident, submit your answer and I'll grade it like a real screen (7/10 or better passes).

Business Context

FinSight, a SaaS finance platform, is training analysts to distinguish accounting profit from cash flow when evaluating business health. A small sample of monthly company records is used to test whether average monthly profit differs materially from average monthly operating cash flow.

Problem Statement

A candidate claims that profit and cash flow are effectively the same in practice. Use the sample data below to test whether the mean monthly profit is different from the mean monthly operating cash flow for the same companies.

Given Data

The table shows monthly values in $ thousands for 10 companies. Because both metrics are observed for the same company and month, this is a paired-sample problem.

Company	Profit	Operating Cash Flow	Difference (Profit - Cash Flow)
1	128	102	26
2	95	110	-15
3	142	120	22
4	110	98	12
5	87	92	-5
6	156	130	26
7	133	121	12
8	101	109	-8
9	149	125	24
10	118	111	7

Assume the differences are approximately normally distributed. Test at a 5% significance level.

Requirements

State the null and alternative hypotheses.
Compute the sample mean difference and sample standard deviation of the differences.
Calculate the paired t-statistic.
Compute the two-sided p-value.
Construct a 95% confidence interval for the mean difference.
Explain, in business terms, what the result says about the difference between profit and cash flow.

Assumptions

Each company contributes one independent monthly observation pair.
The paired differences are approximately normal.
Profit and operating cash flow are measured consistently across companies.