CFC Financial Analysis and Valuation

Question 1

Which financial ratio measures a company's ability to meet short-term obligations using only its most liquid assets?

Accepted Answer

Quick (acid-test) ratio

Answer

Current ratio

Answer

Debt-to-equity ratio

Answer

Interest coverage ratio

Question 2

Free cash flow to equity (FCFE) represents:

Accepted Answer

Cash available to equity shareholders after capital expenditures and debt repayments

Answer

Operating cash flow before interest and taxes

Answer

Net income plus depreciation

Answer

Total revenue minus operating expenses

Question 3

When a CFC uses discounted cash flow (DCF) analysis, the terminal value accounts for:

Accepted Answer

All cash flows beyond the explicit forecast period in perpetuity

Answer

The first five years of projected cash flows

Answer

The company's liquidation value

Answer

Current balance sheet assets only

Question 4

The debt-to-equity ratio of 2.5 indicates that for every dollar of equity, the company carries:

Accepted Answer

$2.50 of debt

Answer

$0.40 of debt

Answer

$1.25 of debt

Answer

$25.00 of debt

Question 5

EBITDA is commonly used as a proxy for operating cash flow. What does it add back to net income?

Accepted Answer

Interest, taxes, depreciation, and amortization

Answer

Taxes and dividends only

Answer

Capital expenditures and working capital changes

Answer

Revenue less cost of goods sold

Question 6

In a comparable company analysis, an analyst selects peer companies and calculates valuation multiples primarily to:

Accepted Answer

Derive a market-implied value based on how similar businesses are priced

Answer

Estimate the company's liquidation value

Answer

Calculate the exact intrinsic value using future cash flows

Answer

Determine the company's book value per share