CPFM Strategic Financial Planning 3

Question 1

A CFO must choose between two projects with equal NPV but different risk profiles. Which tool best quantifies the risk difference?

Accepted Answer

Sensitivity analysis

Answer

Sensitivity analysis shows how changes in key assumptions affect outcomes, revealing each project's risk exposure.

Question 2

Strategic financial planning should align with which overarching organizational element?

Accepted Answer

The corporate vision and mission

Answer

Effective financial strategy must support and align with the organization's vision and mission.

Question 3

Which financing decision affects a firm's long-term capital structure?

Accepted Answer

Issuing long-term debt versus equity

Answer

Choosing between long-term debt and equity directly shapes the firm's capital structure and financial risk.

Question 4

A strategic plan projects a funding gap in year three. What is the most appropriate proactive response?

Accepted Answer

Secure financing arrangements in advance

Answer

Identifying a future funding gap allows the firm to arrange financing proactively before liquidity is threatened.

Question 5

Which ratio is most useful for assessing whether a strategic plan keeps the firm solvent over time?

Accepted Answer

Debt-to-equity ratio

Answer

The debt-to-equity ratio measures leverage and helps assess long-term solvency under a strategic plan.

CPFM Practice Test