Assessment Review - Corporate Finance Institute-21-40

9/19/21, 4:37 PM Assessment Review - Corporate Finance Institute
FMVA Practice Exam
Below is a scored review of your assessment. All questions are shown.
Correct Answer Partially Correct Incorrect Answer
https://cfi.onlinetests.app/Assess.aspx?guid=336D4D99CA304F228A104958FBFACA23&a=R1 1/27
21 Based on the following information from ABC Company’s financial analysis, which one of the following statements is NOT
true?
Ratio Year 1 Year 2 Year 3 Year 4 Year 5

Debt to equity 0.05 0.02 0.01 0.01 0.02
Operating income ratio 15.9% 18.6% 17.5% 19.6% 21.3%
Payable turnover ratio 9.75 10.63 11.24 13,15 13.52
Inventory turnover ratio 6.31 5.76 7.28 10.53 15.36
Gross profit ratio 58.3% 52.3% 46.9% 49.5% 41.3%
Net profit ratio 13.2% 15.2% 14.1% 15.9% 16.4%
Current ratio 7.35 4.96 3.28 2.65 3.14
Your Answer The company’s ability to cover its short-term obligations is getting higher over the
five years.
Correct Answer The company’s ability to cover its short-term obligations is getting higher over the
five years.
Explanation
Inventory turnover ratios measures how quickly the company sells the inventory. The higher the ratio, the quicker the
company is at selling its inventory.
Debt to equity ratio measures how much leverage the company has. When the ratio is very low, it means that the company
has little debt and maybe underleveraged.
Gross profit ratio shows how much revenue is left over after paying the cost of goods sold. When this ratio decreases, it
means the company is spending more on goods sold.
Current ratio measures the ability of a company to cover its short-term obligations. The lower the ratio, the lower ability the
company has to cover its short-term obligations.
22 Which financial leverage ratio is used with two other ratios to mathematically produce the return on equity ratio?
Your Answer Total Assets / Equity
Correct Answer Total Assets / Equity
Explanation
Financial leverage ratio = total assets / equity
23 What is the impact on cash flow from operations in the current year based on the change in operating assets and
liabilities listed below?
Your Answer 200
Correct Answer -200
Explanation
Increase in accounts receivable = 1825- 1725 = 100 (This has a negative impact on the cash flow)
Increase in inventory = 1785 - 1535 = 250 (This has a negative impact on the cash flow)
Increase in accounts payable = 1475 - 1325 = 150 (This has a positive impact on the cash flow)
In conclusion, the impact on cash flow = -100 - 250 + 150 = -200
24 Which Excel function or tool will you use to display the cells that are referred to by a formula in the selected cell?
Your Answer Trace Precedents
Correct Answer Trace Precedents
Explanation
None.
25 What’s the forecasted capital expenditure based on the information below?
Net PP&E beginning of period: 15,000
Net PP&E end of period: 17,500
Depreciation expenses: 2,400
Your Answer 4,900
Correct Answer 4,900
Explanation
Capital expenditure = 17,500 – 15,000 + 2,400 = 4,900
26 Please sort the following into pros for comparable company analysis and pros for precedent transaction analysis.
Observable current value for a company (what investors are actually paying for business right now)
Your Answer Comparable company analysis
Correct Answer Comparable company analysis
Large number of potential companies to compare to
Readily available
Includes takeover premium / control premium
Your Answer Precedent transaction analysis
Correct Answer Precedent transaction analysis
Includes synergy value
Your Answer Precedent transaction analysis
Shows the value investors paid for the entire company (not just 1 share)
Explanation
Please review the Comparable Company Analysis (Comps) section.
27 Assuming a company has no other funding sources other than debt and common equity, what is the difference
between enterprise value and equity value?
Your Answer All interest bearing debt less cash and equivalents
Correct Answer All interest bearing debt less cash and equivalents
Explanation
Net debt is all interest bearing debt less cash and cash equivalents.
28 How do you find the terminal value using the EV/EBITDA exit multiple?
Your Answer Terminal EV = EV/EBITDA x EBIT value of final year of forecast
Correct Answer Terminal EV = EV/EBITDA x EBITDA value of final year of forecast
Explanation
The EBITDA value used must be the EBITDA value of the final year of forecast.
29 Please open the attached Excel file.
Budgeting & Forecasting Assessment-Questions.xlsx
Use simple linear regression to estimate the relationship between promotion and revenue for ABC Company. What will the
revenue be when the promotion cost is 150?
Your Answer $1059.51
Correct Answer $1059.51
Explanation
The equation generated from the simple linear regression is Y = 6.2716 X + 118.77. Revenue = 6.2716 x 150 + 118.77
See the attached Excel file for details:
Budgeting & Forecasting Assessment-Answers.xlsx
30 To find out the value of the assumptions that are needed to hit a certain budget target, you would use ______; to
optimize an output, you would use ______.
Your Answer Goal seek, solver
Correct Answer Goal seek, solver
Explanation
You would use goal seek and solver, because pivot table is used to perform analysis on the data, while consolidate is to
summarize data from separate sheets onto one sheet.
31 In a bottom-up approach, managers should have a ________ level of controllability and a ________ level of involvement
in budget setting.
Your Answer High, high
Correct Answer High, high
Explanation
In a bottom-up approach, the manager needs control over the situation to have incentives to improve the operating
process. Having the manager take part in the budget-making process creates a sense of involvement and shared
responsibility, not just something imposed by the top managers.
32 What is the main argument of "Beyond Budgeting"?
Your Answer Firms today need to be more flexible and responsive to deal with unpredictable
change, hyper competition and increasingly fickle customers
Correct Answer Firms today need to be more flexible and responsive to deal with unpredictable
change, hyper competition and increasingly fickle customers
Explanation
Although there are 12 principles to beyond budgeting, they are completely new principles, not ones added to the traditional
principles.
Although CEO of General Electric states that budgets should never have existed, "Beyond Budgeting" still argues that
budgets should be made more flexible instead, not eliminated.
"Beyond Budgeting" entails a shift from a performance emphasis on numbers to one based on people and institutional
arrangements, and have nothing to do with operating and cash budget.
33
From the chart above, decision makers should pay most attention to the month:
Your Answer Sep 2018
Correct Answer Sep 2018
Explanation
The cash balance in Sep 2018 get dangerously below zero, so management should be aware of this situation and plan
activities accordingly.
34 Data validation works for setting a reasonable range for _______.
Your Answer Inputs
Correct Answer Inputs
Explanation
None.
35 To arrive at operating cash flows, you should start with _______, _______ non-cash items and then adding or subtracting
changes in working capital.
Your Answer net income, adding
Correct Answer net income, adding
Explanation
None.
36 You should perform sensitivity analysis when:
Your Answer You need to determine which assumptions matter the most
Correct Answer You need to determine which assumptions matter the most
Explanation
None.
37 When performing a scenario analysis, which of the following tools/functions in Excel is used to create a dropdown list
where we can select the live case?
Your Answer Data Validation
Correct Answer Data Validation
Explanation
Data Validation is used to create a switch for the live case which the user wants to test to see how changes in multiple inputs
impact the output.
Data Table, Tornado Chart and the INDEX MATCH MATCH function are used to perform a sensitivity analysis.
38 When creating a waterfall chart for ABC Inc.’s 2018 net earnings, which of the data points do you need to set as totals?
Select ALL correct answers.
Your Answer Revenue

Gross profit
Net earnings
Correct Answer Revenue

Gross profit
Net earnings
Explanation
None.
39 Which type of chart is best for showing the impact of sensitivity analysis on a business?
Your Answer Tornado chart
Correct Answer Tornado chart
Explanation
None.
40 If the last data point in this chart is the accumulated total (1258), what will you do to set up the chart properly?
Your Answer Right click the last data point and select “Set as Total”
Correct Answer Right click the last data point and select “Set as Total”
Explanation
None.
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9/19/21, 4:37 PM Assessment Review - Corporate Finance Institute

FMVA Practice Exam

Below is a scored review of your assessment. All questions are shown.

Correct Answer Partially Correct Incorrect Answer

Ratio Year 1 Year 2 Year 3 Year 4 Year 5

Your Answer Total Assets / Equity

Correct Answer Total Assets / Equity

Your Answer 200

Correct Answer -200

Your Answer Trace Precedents

Correct Answer Trace Precedents

25 What’s the forecasted capital expenditure based on the information below?

Net PP&E beginning of period: 15,000

Net PP&E end of period: 17,500

Depreciation expenses: 2,400

Your Answer 4,900

Correct Answer 4,900

Your Answer Comparable company analysis

Correct Answer Comparable company analysis

Large number of potential companies to compare to

Your Answer Comparable company analysis

Correct Answer Comparable company analysis

Your Answer Comparable company analysis

Correct Answer Comparable company analysis

Includes takeover premium / control premium

Your Answer Precedent transaction analysis

Correct Answer Precedent transaction analysis

Includes synergy value

Your Answer Precedent transaction analysis

Correct Answer Precedent transaction analysis

Your Answer Comparable company analysis

Correct Answer Precedent transaction analysis

Your Answer Terminal EV = EV/EBITDA x EBIT value of final year of forecast

Correct Answer Terminal EV = EV/EBITDA x EBITDA value of final year of forecast

29 Please open the attached Excel file.

Budgeting & Forecasting Assessment-Questions.xlsx

Your Answer $1059.51

Correct Answer $1059.51

See the attached Excel file for details:

Budgeting & Forecasting Assessment-Answers.xlsx

Your Answer Goal seek, solver

Correct Answer Goal seek, solver

Your Answer High, high

Correct Answer High, high

32 What is the main argument of "Beyond Budgeting"?

Your Answer Sep 2018

Correct Answer Sep 2018

34 Data validation works for setting a reasonable range for _______.

Your Answer Inputs

Correct Answer Inputs

Your Answer net income, adding

Correct Answer net income, adding

36 You should perform sensitivity analysis when:

Your Answer Data Validation

Correct Answer Data Validation

Your Answer Revenue

Correct Answer Revenue

Your Answer Tornado chart

Correct Answer Tornado chart

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Privacy Policy. Assessment content is copyright 2021, Corporate Finance Institute.

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