CBS Financial & Risk Management 4

Question 1

A company uses scenario analysis during strategic planning. What is the primary benefit of this technique in risk management?

Accepted Answer

It evaluates how different assumptions affect outcomes under multiple future states

Answer

Scenario analysis tests financial outcomes under multiple plausible future states (best, base, worst), helping strategists understand risk exposure across conditions.

Question 2

Which ratio measures how effectively a company generates profit from its assets?

Accepted Answer

Return on Assets (ROA)

Answer

Return on Assets (ROA) measures net income relative to total assets, showing how efficiently management uses assets to generate profit.

Question 3

In enterprise risk management (ERM), which framework is most widely adopted to integrate risk management into strategic objectives?

Accepted Answer

COSO ERM Framework

Answer

The COSO ERM Framework provides a comprehensive approach to identifying, assessing, and managing risk aligned with strategic objectives.

Question 4

When a company issues new equity shares to raise capital, existing shareholders experience:

Accepted Answer

Dilution of their ownership percentage

Answer

Issuing new shares increases total shares outstanding, reducing each existing shareholder's proportional ownership — this is called dilution.

Question 5

A certified business strategist recommends stress testing a firm's financial model. What does stress testing primarily assess?

Accepted Answer

Resilience of financial position under extreme adverse scenarios

Answer

Stress testing evaluates whether a company can withstand extreme but plausible shocks, such as severe recessions or sudden market disruptions.

(CBS) Certified Business Strategist Practice Test

(CBS) Certified Business Strategist Practice Test

CBS Financial & Risk Management 4