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General Practice Test Flashcards

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

Read the first 7 General Practice Test flashcards as text

  1. The weighted average cost of capital (WACC) is used most appropriately as the discount rate for projects with:

    Answer: Risk similar to the firm's overall risk

    WACC reflects the firm's blended financing cost and fits average-risk projects.

  2. Under accrual accounting, revenue is recognized when it is:

    Answer: Earned, regardless of cash receipt

    Accrual accounting recognizes revenue when earned, not when cash changes hands.

  3. An increase in a company's days sales outstanding (DSO) generally signals:

    Answer: Slower collection of receivables

    Rising DSO means customers are taking longer to pay their invoices.

  4. Which capital budgeting method ignores the time value of money?

    Answer: Payback period

    The simple payback period sums undiscounted cash flows until recovery.

  5. A firm with high operating leverage will experience what effect on operating income when sales rise?

    Answer: A magnified increase in operating income

    High fixed costs amplify the impact of sales changes on operating income.

  6. What is the primary goal of financial management in a corporation?

    Answer: Maximize shareholder wealth

    The widely accepted objective is maximizing shareholder (owner) wealth.

  7. An efficient market in which prices reflect all publicly available information is described by which form of the EMH?

    Answer: Semi-strong form

    Semi-strong efficiency means prices incorporate all public information.