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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 is preparing its annual operating plan. Which starting point best ensures the budget is aligned with strategic objectives?

    Answer: Strategic plan targets and key performance indicators

    Anchoring the operating plan to strategic targets and KPIs ensures resource allocation directly supports the company's long-term goals.

  2. In treasury financial planning, what does 'cash flow at risk (CFaR)' measure?

    Answer: The potential shortfall in cash flow below a target level due to risk factors at a given confidence level

    CFaR quantifies the worst-case cash flow shortfall at a specified confidence level (e.g., 95%) caused by adverse movements in market risk factors.

  3. A company's days sales outstanding (DSO) increases from 35 to 50 days while revenue stays flat. What is the direct financial planning implication?

    Answer: More working capital will be needed to fund the higher receivables balance

    Higher DSO means cash is collected more slowly, increasing the accounts receivable balance and requiring more working capital financing.

  4. Which financial planning KPI measures the accuracy of a company's forecasting process?

    Answer: Forecast accuracy rate (actual vs. forecast variance %)

    Forecast accuracy rate tracks the average percentage deviation between forecasted and actual results, indicating the reliability of the planning process.

  5. When performing a DuPont analysis, which decomposition correctly breaks down return on equity (ROE)?

    Answer: ROE = Net margin × Asset turnover × Equity multiplier

    The three-factor DuPont formula decomposes ROE into profitability (net margin), efficiency (asset turnover), and leverage (equity multiplier).

  6. A subsidiary generates €10M in earnings. The USD/EUR rate was 1.10 when budgeted but is 1.05 at year-end. What is the currency translation impact on USD earnings?

    Answer: $500,000 unfavorable

    €10M × (1.05 − 1.10) = −$500,000; the weaker euro reduces USD earnings by $500,000, an unfavorable translation variance.

  7. In financial planning, which term describes costs that have already been incurred and cannot be recovered regardless of future decisions?

    Answer: Sunk costs

    Sunk costs are past expenditures that cannot be reversed and should be excluded from forward-looking capital allocation and decision-making.