CTE Financial Management & Budgeting Flashcards
6 cards from real CTE practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CTE Financial Management & Budgeting flashcards as text
Which financial ratio do telecom analysts use to assess a carrier's ability to service its debt, calculated as EBITDA divided by total interest expense?
Answer: Interest coverage ratio
The interest coverage ratio measures how many times a company's EBITDA covers its annual interest payments, indicating financial health and debt serviceability.
In US telecom financial reporting, how are spectrum licenses typically treated on the balance sheet under US GAAP?
Answer: Recorded as intangible assets and evaluated annually for impairment (not amortized for indefinite-lived licenses)
Under US GAAP, spectrum licenses with indefinite useful lives are recorded as intangible assets and tested annually for impairment rather than systematically amortized.
A CTE must present the financial justification for a $200M fiber-to-the-home (FTTH) buildout. Which metric would best demonstrate long-term project viability to the board?
Answer: Internal Rate of Return (IRR) compared to the company's hurdle rate
IRR calculates the discount rate at which the project's NPV equals zero; if IRR exceeds the company's hurdle rate (cost of capital), the project creates shareholder value.
What is churn rate and why is it a critical financial metric for US mobile carriers?
Answer: The percentage of subscribers who cancel service in a given period, directly impacting recurring revenue
Churn rate measures subscriber attrition; high churn erodes the recurring revenue base and forces expensive re-acquisition spending to maintain subscriber counts, directly affecting profitability.
When evaluating a telecom merger in the US, what is the financial significance of 'synergies' in the deal valuation?
Answer: Cost and revenue synergies represent incremental value created by combining two companies that neither could achieve independently
Synergies — including network cost reduction, overlapping OpEx elimination, and combined pricing power — justify paying a premium over standalone value in telecom M&A transactions.
A US telecom executive must manage foreign exchange risk on equipment purchases denominated in euros. Which financial instrument is commonly used to hedge this currency exposure?
Answer: Forward exchange contract
A forward exchange contract locks in a predetermined exchange rate for a future date, eliminating the uncertainty of currency fluctuations on large equipment purchases denominated in foreign currencies.