FA Cheat Sheet 2026
The 30 highest-yield FA facts, distilled from real exam questions. Print it, save it as a PDF, or study it here — free, no sign-up.
- Which short-term instrument is most commonly used by corporate treasurers to invest excess cash due to its high liquidity and safety? → Treasury bills (T-bills)
- What is the purpose of a sales forecast in the budgeting process? → To serve as the foundation for all other operational budgets
- What is the purpose of a risk register in financial risk management? → To document identified risks, their likelihood, impact, and mitigation plans
- Enterprise Risk Management (ERM) is distinguished from traditional risk management because it: → Takes a company-wide, integrated view of all risk types
- What is a Monte Carlo simulation used for in risk analysis? → Modeling the probability of different outcomes using random sampling
- Which of the following regulations requires publicly traded companies in the U.S. to maintain accurate financial reporting and disclose material information? → Sarbanes-Oxley Act (SOX)
- What is a leveraged buyout (LBO)? → The acquisition of a company using a significant amount of borrowed money
- Which of the following is a primary objective of financial compliance? → Ensuring adherence to legal and regulatory requirements
- What is the purpose of a 'bridge' or 'walk' in financial modeling? → To reconcile or explain the change between two values step by step
- What is the primary purpose of a common-size income statement? → To express all line items as a percentage of net sales
- Operational risk in finance refers to: → Losses from failures in internal processes, systems, people, or external events
- What is the purpose of conducting a cost-benefit analysis? → To determine whether the benefits of a project outweigh its costs
- What is the yield to maturity (YTM) of a bond? → The total return anticipated if held to maturity, expressed as an annual rate
- What type of analysis compares a company's value to its precedent acquisition transactions? → Precedent Transaction Analysis
- In a leveraged buyout, the exit multiple is used to calculate: → The estimated enterprise value at the time the PE firm sells the investment
- Which of the following is classified as a non-cash item that reduces net income but not operating cash flow? → Depreciation
- What is the primary benefit of driver-based forecasting? → It links financial forecasts directly to key business activity drivers
- What is a 'haircut' in financial modeling and valuation? → A reduction applied to asset values to account for risk or illiquidity
- When building a DCF model, which rate is typically used as the discount rate for an unlevered free cash flow projection? → Weighted Average Cost of Capital (WACC)
- Which financial metric is commonly used to evaluate whether a company should pursue a new project? → Internal Rate of Return (IRR)
- What does a football field chart display in investment banking and valuation? → A range of values from multiple valuation methodologies side by side
- What is credit risk in financial management? → The risk that a borrower or counterparty will fail to meet its obligations
- What type of budget is adjusted based on actual activity levels rather than fixed predetermined amounts? → Flexible Budget
- In budgeting, a top-down approach refers to: → Senior management setting the overall budget and passing it down to departments
- Which of the following best defines capital budgeting? → Estimating the costs and benefits of long-term investment projects
- In zero-based budgeting, every budget cycle begins with: → A zero base where all expenses must be re-justified
- Which of the following best defines operating leverage? → The ability to increase revenue with minimal cost increases
- What does the Internal Rate of Return (IRR) represent? → The discount rate that makes the NPV of an investment equal to zero
- Which section of the cash flow statement includes payments for property, plant, and equipment? → Investing Activities
- What is the Net Present Value (NPV) used for in strategic decision-making? → To evaluate the profitability of an investment by discounting future cash flows
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