Financial Analysis & Planning Flashcards
7 cards from real CCM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Financial Analysis & Planning flashcards as text
A company's free cash flow (FCF) is negative despite positive net income. Which of the following is the most likely explanation?
Answer: Heavy capital expenditures exceeded operating cash generation
FCF = Operating Cash Flow − CapEx; heavy capital investment can make FCF negative even when the income statement shows a profit.
Which cost behavior pattern remains fixed in total but decreases on a per-unit basis as production volume increases?
Answer: Fixed costs
Fixed costs (e.g., rent, insurance) stay constant in total but spread over more units as volume rises, reducing the fixed cost per unit.
When performing a capital budgeting analysis, sunk costs should be:
Answer: Excluded because they are irreversible and unaffected by the decision
Sunk costs have already been incurred and cannot be recovered, so they are irrelevant to forward-looking investment decisions.
A rolling forecast differs from a traditional annual budget primarily because it:
Answer: Extends continuously by adding a new period as each period ends
A rolling forecast constantly updates by adding a new future period (e.g., a month or quarter) as the most recent period closes, maintaining a fixed planning horizon.
An unfavorable direct labor efficiency variance indicates that:
Answer: More labor hours were used than the standard allowed for actual output
Labor efficiency variance = (Actual Hours − Standard Hours) × Standard Rate; an unfavorable result means more hours were consumed than the standard for the achieved output.
In financial modeling, the purpose of a 'waterfall' cash flow structure is to:
Answer: Rank creditors and distribute cash flows in a specified priority order
A waterfall structure defines the sequence in which multiple stakeholders (senior debt, mezzanine, equity) receive distributions from project or company cash flows.
Which of the following metrics measures the total return to equity holders by combining dividend yield and capital appreciation?
Answer: Total shareholder return (TSR)
Total Shareholder Return = (Capital Gain + Dividends) / Initial Investment, capturing the complete return experienced by equity investors.