CFP Financial Analysis & Reporting 2 — Questions and Answers
Question 1: A fintech firm uses API-based open banking data to calculate a borrower's Debt-Service Coverage Ratio (DSCR). Which formula correctly expresses DSCR?
- Net Operating Income / Total Debt Outstanding
- Net Operating Income / Annual Debt Service (Correct answer)
- Gross Revenue / Monthly Debt Payments
- EBITDA / Total Liabilities
Correct answer: Net Operating Income / Annual Debt Service
DSCR is calculated as Net Operating Income divided by Annual Debt Service, measuring cash flow available to cover debt obligations.
Question 2: When a neobank reports its Tier 1 Capital Ratio, which component is excluded from Tier 1 capital under Basel III?
- Common Equity Tier 1 (CET1) instruments
- Retained earnings
- Subordinated long-term debt (Correct answer)
- Additional Tier 1 instruments such as perpetual AT1 bonds
Correct answer: Subordinated long-term debt
Subordinated long-term debt qualifies as Tier 2 capital, not Tier 1, under Basel III's capital hierarchy.
Question 3: A payment processor reports a monthly gross payment volume (GPV) of $500M with a take rate of 2.2%. What is its net revenue before processing costs?
- $1.1 million
- $110 million
- $11 million (Correct answer)
- $22 million
Correct answer: $11 million
$500M × 2.2% = $11 million in net revenue before subtracting interchange and processing costs.
Question 4: In fintech financial reporting, 'cohort analysis' of customer lifetime value (LTV) is best used to assess which of the following?
- The current market share versus competitors
- Revenue recovery from churned users
- Long-term profitability of customer groups acquired in the same period (Correct answer)
- Regulatory capital adequacy for each product line
Correct answer: Long-term profitability of customer groups acquired in the same period
Cohort LTV analysis groups customers by acquisition period to track long-term revenue and profitability trends over time.
Question 5: A robo-advisor platform must disclose its expense ratio in client reports. The expense ratio is calculated as:
- Total fund expenses / Average net assets under management (Correct answer)
- Total revenue / Total operating expenses
- Net investment income / Total gross revenue
- Management fee / Total client deposits
Correct answer: Total fund expenses / Average net assets under management
The expense ratio equals total fund expenses divided by average net assets, expressed as a percentage.
Question 6: Under ASC 606, when should a fintech SaaS company recognize revenue for an annual subscription paid upfront?
- Entirely at contract inception when cash is received
- Ratably over the subscription period as performance obligations are satisfied (Correct answer)
- When the customer activates their account
- At the end of the subscription term upon renewal confirmation
Correct answer: Ratably over the subscription period as performance obligations are satisfied
ASC 606 requires revenue recognition ratably over the service period because performance obligations are satisfied over time.
Question 7: Which metric best captures the efficiency of a digital lender's loan origination operations?
- Net Interest Margin (NIM)
- Cost per Originated Loan (CPOL) (Correct answer)
- Loan-to-Deposit Ratio (LDR)
- Return on Risk-Weighted Assets (RORWA)
Correct answer: Cost per Originated Loan (CPOL)
Cost per Originated Loan (CPOL) directly measures the operational cost efficiency of the loan origination process.
CFP Financial Analysis & Reporting 2
A fintech firm uses API-based open banking data to calculate a borrower's Debt-Service Coverage Ratio (DSCR).
Which formula correctly expresses DSCR?