CTP Financial Planning and Analysis 2

Question 1

A company's contribution margin ratio is 40% and fixed costs are $800,000. What is the break-even sales revenue?

Accepted Answer

$2,000,000

Answer

Break-even sales = Fixed costs / Contribution margin ratio = $800,000 / 0.40 = $2,000,000.

Question 2

Which rolling forecast approach updates projections by dropping the most recently completed period and adding a new future period?

Accepted Answer

Rolling 12-month forecast

Answer

A rolling 12-month forecast continuously adds a new month as each month closes, maintaining a constant forward-looking horizon.

Question 3

In scenario analysis for financial planning, what distinguishes a 'base case' from a 'stress case'?

Accepted Answer

Base case reflects most likely conditions while stress case tests severe adverse conditions

Answer

The base case represents the most probable outcome, while the stress case evaluates how the organization performs under extreme negative conditions.

Question 4

A treasury analyst is evaluating capital expenditure proposals using the profitability index (PI). Which investment should be prioritized when capital is rationed?

Accepted Answer

The project with the highest PI ratio

Answer

When capital is rationed, PI ranks projects by value created per dollar invested, optimizing allocation of limited funds.

Question 5

Which metric directly measures how efficiently a company converts revenue into free cash flow?

Accepted Answer

Free cash flow conversion rate

Answer

Free cash flow conversion rate (FCF / Net income) measures how effectively earnings translate into actual cash available to the company.

Certified Treasury Professional Exam Practice Test

Certified Treasury Professional Exam Practice Test

CTP Financial Planning and Analysis 2