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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.

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  1. A company reports EBITDA of $5M, interest expense of $1M, taxes of $0.5M, depreciation of $0.8M, and amortization of $0.2M. What is net income?

    Answer: $2.5M

    Net income = EBITDA − D&A − Interest − Taxes = $5M − $1M − $0.5M − $1M = $2.5M.

  2. Which working capital metric best predicts near-term liquidity stress in financial planning models?

    Answer: Cash conversion cycle (CCC)

    The cash conversion cycle measures how long cash is tied up in operations (DIO + DSO − DPO), directly revealing liquidity pressure timing.

  3. A treasury team uses a top-down budgeting approach. What is the primary characteristic of this method?

    Answer: Senior management sets overall targets that cascade down to operating units

    Top-down budgeting starts with executive-level targets and constraints that are then distributed to lower organizational levels.

  4. Which cost behavior pattern describes a cost that remains fixed within a relevant range but jumps to a higher level when activity exceeds that range?

    Answer: Step-fixed cost

    Step-fixed costs (also called step costs) are constant within a capacity range but increase in discrete jumps when activity crosses a threshold.

  5. When comparing two mutually exclusive projects with different lives using NPV, which adjustment is most appropriate?

    Answer: Use the equivalent annual annuity (EAA) method

    The equivalent annual annuity converts NPV to an annual figure, enabling fair comparison of projects with unequal lifespans.

  6. In an integrated financial model, which statement drives changes in the balance sheet's cash position?

    Answer: Statement of cash flows ending cash balance

    The cash flow statement reconciles operating, investing, and financing activities to produce the ending cash balance that plugs into the balance sheet.

  7. A company has operating leverage of 3.0. If revenue increases by 10%, by approximately how much will operating income increase?

    Answer: 30%

    Operating leverage multiplies the percentage change in revenue: 3.0 × 10% = 30% increase in operating income.