Practice Test Geeks(CFC) Certified Financial Controller Practice Test
← All CFC Flashcard Decks

Financial Management & Strategy Flashcards

7 cards from real CFC 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 Management & Strategy flashcards as text

  1. A company issues $10 million in bonds at a 6% coupon when its tax rate is 25%. What is the after-tax cost of this debt?

    Answer: 4.5%

    After-tax cost of debt = 6% × (1 − 0.25) = 4.5%, reflecting the tax shield on interest payments.

  2. Which financial strategy is most consistent with maximizing long-term shareholder value?

    Answer: Investing in all projects with positive NPV

    Accepting all positive-NPV projects directly increases the intrinsic value of the firm, which is the foundation of shareholder wealth maximization.

  3. A controller notices that a division's ROIC consistently falls below WACC. This indicates the division is:

    Answer: Destroying economic value

    When ROIC < WACC, each dollar invested earns less than it costs, destroying shareholder value and producing negative EVA.

  4. Which scenario best describes a natural hedge in foreign currency risk management?

    Answer: Matching foreign currency revenues with foreign currency expenses in the same currency

    A natural hedge offsets currency risk by matching inflows and outflows in the same foreign currency, eliminating net exposure without derivatives.

  5. Under the Gordon Growth Model, a stock's intrinsic value increases if:

    Answer: The dividend growth rate increases, holding all else constant

    In the Gordon Growth Model (P = D1 / (r − g)), a higher growth rate (g) reduces the denominator, increasing the calculated intrinsic value.

  6. A company with a high degree of financial leverage will experience:

    Answer: Greater variability in EPS relative to changes in EBIT

    Financial leverage amplifies the effect of EBIT changes on EPS because fixed interest charges create a multiplier effect on earnings per share.

  7. In scenario analysis for capital budgeting, a financial controller typically evaluates:

    Answer: NPV under best-case, base-case, and worst-case assumptions simultaneously

    Scenario analysis examines multiple input variables changing together across defined scenarios (optimistic, base, pessimistic) to gauge the range of outcomes.