Financial Planning and Analysis Flashcards
7 cards from real CTP 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 Planning and Analysis flashcards as text
A company's contribution margin ratio is 40% and fixed costs are $800,000. What is the break-even sales revenue?
Answer: $2,000,000
Break-even sales = Fixed costs / Contribution margin ratio = $800,000 / 0.40 = $2,000,000.
Which rolling forecast approach updates projections by dropping the most recently completed period and adding a new future period?
Answer: Rolling 12-month forecast
A rolling 12-month forecast continuously adds a new month as each month closes, maintaining a constant forward-looking horizon.
In scenario analysis for financial planning, what distinguishes a 'base case' from a 'stress case'?
Answer: Base case reflects most likely conditions while stress case tests severe adverse conditions
The base case represents the most probable outcome, while the stress case evaluates how the organization performs under extreme negative conditions.
A treasury analyst is evaluating capital expenditure proposals using the profitability index (PI). Which investment should be prioritized when capital is rationed?
Answer: The project with the highest PI ratio
When capital is rationed, PI ranks projects by value created per dollar invested, optimizing allocation of limited funds.
Which metric directly measures how efficiently a company converts revenue into free cash flow?
Answer: Free cash flow conversion rate
Free cash flow conversion rate (FCF / Net income) measures how effectively earnings translate into actual cash available to the company.
When a company's actual sales volume exceeds the flexible budget sales volume, what type of variance results?
Answer: Favorable volume variance
Selling more units than budgeted creates a favorable volume variance because revenues exceed the flexible budget expectation.
In long-range financial planning, which technique assigns probabilities to different scenarios and weights outcomes accordingly?
Answer: Monte Carlo simulation
Monte Carlo simulation runs thousands of iterations with probabilistic inputs to generate a distribution of possible financial outcomes.