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Financial Planning Flashcards

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

Read the first 7 Financial Planning flashcards as text

  1. A company has current assets of $300,000 and current liabilities of $150,000. What is its current ratio?

    Answer: 2.0

    Current ratio = $300,000 / $150,000 = 2.0.

  2. The quick (acid-test) ratio differs from the current ratio mainly because it excludes:

    Answer: Inventory

    The quick ratio removes inventory (and prepaids) because they are less readily converted to cash.

  3. Days inventory outstanding is 45, days sales outstanding is 30, and days payables outstanding is 25. What is the cash conversion cycle?

    Answer: 50 days

    Cash conversion cycle = 45 + 30 - 25 = 50 days.

  4. When computing the weighted average cost of capital, the preferred weights are based on:

    Answer: Market values of debt and equity

    Market values reflect the current cost of raising capital and investors' current claims.

  5. A supplier offers terms of 2/10, net 30. Using a 360-day year, the approximate annual cost of forgoing the discount is:

    Answer: 36.7%

    Cost = (2/98) x (360/20) ≈ 36.7%.

  6. A firm with a high degree of operating leverage will experience:

    Answer: Larger percentage changes in EBIT for a given change in sales

    High fixed operating costs magnify the effect of sales changes on operating income.

  7. Annual demand is 4,500 units, ordering cost is $100 per order, and holding cost is $10 per unit per year. What is the economic order quantity?

    Answer: 300 units

    EOQ = √(2 x 4,500 x 100 / 10) = √90,000 = 300 units.