CFP Financial Analysis & Reporting 3 — Questions and Answers
Question 1: A crypto exchange must mark its digital asset inventory to market daily. This accounting treatment is best described as:
- Historical cost accounting
- Fair value accounting through profit or loss (Correct answer)
- Amortized cost method
- Lower of cost or net realizable value
Correct answer: Fair value accounting through profit or loss
Digital assets held as inventory are typically measured at fair value through profit or loss, reflecting real-time market prices.
Question 2: A Buy Now Pay Later (BNPL) provider classifies merchant discount revenue separately from consumer late fees. This practice reflects which reporting principle?
- Matching principle
- Disaggregation of revenue streams under ASC 606 (Correct answer)
- Full disclosure principle
- Prudence concept
Correct answer: Disaggregation of revenue streams under ASC 606
ASC 606 requires companies to disaggregate revenue into categories that depict how the nature, amount, and timing of revenue differ.
Question 3: When analyzing a fintech's burn rate, an investor calculates the company has $12M in cash and burns $800K per month. What is the runway?
- 9.6 months
- 12 months
- 15 months (Correct answer)
- 16 months
Correct answer: 15 months
$12M ÷ $800K/month = 15 months of runway before the company exhausts its cash reserves.
Question 4: In a peer-to-peer lending platform's financial statements, provisions for loan losses are recorded to account for:
- Expected future revenue from performing loans
- Estimated credit losses on the current loan portfolio (Correct answer)
- Platform operational overhead and technology costs
- Regulatory capital buffers required by the SEC
Correct answer: Estimated credit losses on the current loan portfolio
Loan loss provisions estimate the expected credit losses on the outstanding portfolio under CECL or similar frameworks.
Question 5: A digital bank's net interest margin (NIM) declined from 4.2% to 3.6% year-over-year. Which scenario most likely explains this?
- Loan origination volume increased significantly
- Funding costs rose faster than the yield on earning assets (Correct answer)
- The bank increased its Tier 1 capital ratio
- Non-interest income grew faster than interest income
Correct answer: Funding costs rose faster than the yield on earning assets
NIM compresses when the cost of liabilities (deposits, borrowings) rises more quickly than the yield earned on loans and investments.
Question 6: Under IFRS 9, a fintech lender must move a loan from Stage 1 to Stage 2 when:
- The borrower misses three consecutive payments
- There is a significant increase in credit risk since initial recognition (Correct answer)
- The loan becomes 90 days past due
- The borrower's credit score drops below 600
Correct answer: There is a significant increase in credit risk since initial recognition
IFRS 9 Stage 2 classification is triggered by a significant increase in credit risk, not necessarily a missed payment.
Question 7: A wealthtech firm reports Assets Under Management (AUM) of $2B with average advisory fee of 0.45%. What is the projected annual fee revenue?
- $900,000
- $9 million (Correct answer)
- $90 million
- $45 million
Correct answer: $9 million
$2,000,000,000 × 0.0045 = $9,000,000 in annual advisory fee revenue.
CFP Financial Analysis & Reporting 3
A crypto exchange must mark its digital asset inventory to market daily.
This accounting treatment is best described as: