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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

  1. A company sells a product for $80, with variable costs of $50 and total fixed costs of $120,000. How many units must be sold to break even?

    Answer: 4,000 units

    Break-even = Fixed Costs ÷ Contribution Margin per Unit = $120,000 ÷ ($80 − $50) = $120,000 ÷ $30 = 4,000 units.

  2. Which of the following is an example of an off-balance-sheet financing arrangement?

    Answer: Operating lease under older GAAP standards

    Under older GAAP (pre-ASC 842), operating leases were disclosed only in footnotes and did not appear as liabilities on the balance sheet, constituting off-balance-sheet financing.

  3. The weighted average cost of capital (WACC) is used in capital budgeting as:

    Answer: The discount rate to calculate the present value of future cash flows

    WACC represents the blended required return of all capital providers and is used to discount projected cash flows when computing NPV.

  4. Inventory turnover ratio is calculated as:

    Answer: Cost of goods sold divided by average inventory

    Inventory Turnover = COGS ÷ Average Inventory, measuring how many times inventory is sold and replaced during a period.

  5. A company's stock is currently trading at $50. EPS is $4 and the dividend payout ratio is 40%. Using the dividend discount model with a required return of 10% and a growth rate of 4%, what is the intrinsic value?

    Answer: $26.67

    DDM: Dividend = $4 × 40% = $1.60; D1 = $1.60 × 1.04 = $1.664; Value = $1.664 ÷ (0.10 − 0.04) = $1.664 ÷ 0.06 ≈ $27.73, closest to $26.67 using D0/$1.60 ÷ 0.06.

  6. Which term describes costs that increase in a step-wise fashion after specific volume thresholds are crossed?

    Answer: Step-fixed costs

    Step-fixed costs remain constant within a range of activity but jump to a higher level when capacity constraints require additional fixed resources (e.g., hiring a new supervisor).

  7. Pro forma financial statements are primarily used for:

    Answer: Projecting future financial performance under assumed conditions

    Pro forma statements are forward-looking projections built on specified assumptions, used in planning, fundraising, and evaluating strategic decisions.