Practice Test Geeks(CCP) Certified Credit Professional Practice Test
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CCP Financial Statement Analysis & Credit Decisions Flashcards

6 cards from real CCP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 6 CCP Financial Statement Analysis & Credit Decisions flashcards as text

  1. When analyzing a potential customer's financial statements, which document most directly reveals the company's ability to generate cash to pay obligations?

    Answer: Statement of cash flows

    The statement of cash flows shows actual cash generated from operations, investing, and financing activities — making it the most direct measure of a company's ability to pay debts.

  2. A buyer's financial statements show net income of $500K but operating cash flow of -$200K. What is the most likely explanation?

    Answer: Working capital is growing faster than earnings, consuming cash despite profitability

    When operating cash flow lags net income, it often signals that receivables, inventory, or other working capital components are expanding, absorbing cash generated from profitable sales.

  3. Which financial ratio directly measures a company's short-term liquidity without including inventory in the calculation?

    Answer: Quick ratio (acid-test ratio)

    The quick ratio (cash + marketable securities + receivables ÷ current liabilities) excludes inventory because it may not be quickly convertible to cash, giving a more conservative liquidity view.

  4. A credit professional notes that a buyer's goodwill increased significantly year-over-year without a disclosed acquisition. This MOST likely indicates:

    Answer: A possible accounting irregularity that warrants further investigation

    Under US GAAP, goodwill only arises from business acquisitions and cannot be internally generated; an unexplained increase is a red flag requiring clarification.

  5. Which of the following is a 'red flag' when reviewing a privately held buyer's financial statements?

    Answer: Compiled financials with no assurance from the accountant

    Compiled financial statements carry no assurance — the accountant merely assembles management-provided data without verification, making them the weakest form of third-party financial documentation.

  6. What does a rising trend in a buyer's accounts payable days (DPO) suggest to a credit professional?

    Answer: The buyer may be stretching payables due to liquidity pressure

    While higher DPO can reflect favorable supplier terms, a rising trend often signals the buyer is delaying payments because of cash flow stress — a key credit warning sign.