CPFM Strategic Financial Planning 2 — Questions and Answers
Question 1: A firm wants to align its capital allocation with its long-term mission rather than short-term earnings. Which planning approach best supports this?
- Strategic financial planning tied to corporate strategy (Correct answer)
- Monthly variance reporting
- Petty cash reconciliation
- Daily cash sweeps
Correct answer: Strategic financial planning tied to corporate strategy
Strategic financial planning links capital allocation decisions to the organization's long-term mission and strategy.
Question 2: Which document translates a company's strategic goals into multi-year financial projections?
- A long-range financial plan (Correct answer)
- A purchase order
- A bank reconciliation
- An expense report
Correct answer: A long-range financial plan
A long-range financial plan converts strategic objectives into multi-year revenue, cost, and investment projections.
Question 3: When evaluating a strategic investment, which metric incorporates the time value of money?
- Net present value (NPV) (Correct answer)
- Accounting payback period
- Gross margin
- Headcount ratio
Correct answer: Net present value (NPV)
NPV discounts future cash flows to present value, explicitly reflecting the time value of money.
Question 4: A strategic plan assumes 5% annual revenue growth, but a recession is possible. What technique tests the plan under different conditions?
- Scenario analysis (Correct answer)
- Double-entry bookkeeping
- Bank confirmation
- Inventory counting
Correct answer: Scenario analysis
Scenario analysis evaluates how the plan performs under alternative future conditions such as a recession.
Question 5: Which of the following is the primary purpose of a SWOT analysis in strategic financial planning?
- Identify strengths, weaknesses, opportunities, and threats (Correct answer)
- Calculate depreciation
- Reconcile the general ledger
- Process payroll
Correct answer: Identify strengths, weaknesses, opportunities, and threats
SWOT analysis assesses internal strengths and weaknesses and external opportunities and threats to inform strategy.
Question 6: A company's weighted average cost of capital (WACC) is used in strategic planning primarily to:
- Set the hurdle rate for evaluating investments (Correct answer)
- Determine employee bonuses
- Calculate sales tax
- Schedule maintenance
Correct answer: Set the hurdle rate for evaluating investments
WACC serves as the minimum acceptable rate of return (hurdle rate) for evaluating strategic investments.
Question 7: Which statement best describes the relationship between strategic planning and budgeting?
- Budgeting allocates short-term resources to execute the strategic plan (Correct answer)
- Budgeting replaces strategic planning
- They are unrelated processes
- Budgeting precedes setting any strategy
Correct answer: Budgeting allocates short-term resources to execute the strategic plan
Budgeting operationalizes the strategic plan by allocating short-term resources to achieve long-term goals.
CPFM Strategic Financial Planning 2
A firm wants to align its capital allocation with its long-term mission rather than short-term earnings.
Which planning approach best supports this?