Practice Test GeeksCFM - Certified Finance Manager Practice Test
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CFM Corporate Finance & Valuation Flashcards

6 cards from real CFM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 6 CFM Corporate Finance & Valuation flashcards as text

  1. A company has EBITDA of $5 million and a net debt of $15 million. The industry EV/EBITDA multiple is 8x. What is the estimated equity value?

    Answer: $25 million

    EV = 8 × $5M = $40M; Equity Value = EV - Net Debt = $40M - $15M = $25M.

  2. What is the primary purpose of a sensitivity analysis in financial modeling?

    Answer: To test how changes in key assumptions affect the output, revealing the range of possible outcomes

    Sensitivity analysis varies one or more input assumptions (e.g., revenue growth, margins) to show how outputs like NPV or EPS change, helping decision-makers understand risk.

  3. Which of the following is considered a non-dilutive source of corporate financing?

    Answer: Senior secured bank loans

    Senior secured bank loans are debt instruments that do not dilute existing shareholder equity, unlike equity issuances or instruments convertible into common shares.

  4. What is the Gordon Growth Model used to calculate?

    Answer: The intrinsic value of a stock based on expected dividends growing at a constant rate

    Gordon Growth Model: P = D1 / (k - g), where D1 is next year's dividend, k is required return, and g is the constant growth rate, providing a simple stock valuation.

  5. In capital structure theory, what is the 'trade-off theory'?

    Answer: Firms balance the tax shield benefits of debt against the costs of financial distress

    The trade-off theory says firms choose leverage by balancing the tax benefit of interest deductibility against the increasing probability and cost of financial distress at higher debt levels.

  6. Which document outlines the terms and conditions of a bank loan, including covenants, interest rate, and repayment schedule?

    Answer: Credit agreement (loan agreement)

    A credit agreement is the legal contract between a borrower and lender specifying all loan terms, including financial covenants the borrower must maintain.