CFM CFM Strategic Finance & Decision Making

Question 1

What is the purpose of Economic Value Added (EVA) as a performance metric?

Accepted Answer

To measure profit after deducting the full cost of capital employed, indicating true economic profit

Answer

To measure revenue growth rate relative to competitors

Answer

To calculate the payback period for capital projects

Answer

To track market share changes over time

Question 2

In a Balanced Scorecard framework, which perspective focuses on internal processes that drive customer satisfaction?

Accepted Answer

Internal business process perspective

Answer

Financial perspective

Answer

Customer perspective

Answer

Learning and growth perspective

Question 3

Which of the following best describes the concept of 'opportunity cost'?

Accepted Answer

The value of the next best alternative foregone when making a decision

Answer

The cost of raw materials in a production process

Answer

A sunk cost that cannot be recovered

Answer

A fixed overhead cost allocated to production

Question 4

What is the primary goal of shareholder wealth maximization in corporate finance?

Accepted Answer

Maximizing the long-term market value of the firm's common equity

Answer

Maximizing current-period accounting profits

Answer

Minimizing all financial risks regardless of return trade-offs

Answer

Paying the highest possible dividends each quarter

Question 5

A company's fixed costs are $200,000, selling price is $50/unit, and variable cost is $30/unit. What is the margin of safety if current sales are 15,000 units?

Accepted Answer

5,000 units

Answer

3,000 units

Answer

10,000 units

Answer

2,000 units

Question 6

What does a high degree of operating leverage indicate?

Accepted Answer

A large proportion of fixed costs relative to variable costs, amplifying profit changes with revenue swings

Answer

The company relies heavily on debt financing

Answer

The company outsources most of its production

Answer

Revenue growth consistently exceeds industry averages