Practice Test Geeks(FAC) Federal Acquisition Certification Practice Test
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Financial Analysis & Valuation Flashcards

7 cards from real FAC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Financial Analysis & Valuation flashcards as text

  1. In federal contracting, a 'rough order of magnitude' (ROM) estimate typically carries an accuracy range of:

    Answer: -25% to +75%

    ROM estimates are early-stage approximations with wide accuracy ranges, commonly cited as -25% to +75% due to limited scope definition.

  2. Which method is BEST suited for estimating costs of a contract that is nearly identical to a previously completed contract?

    Answer: Analogous estimating

    Analogous estimating uses historical data from a similar past project as the basis for the new estimate, making it ideal when a close precedent exists.

  3. The Net Present Value (NPV) method in capital budgeting discounts future cash flows because:

    Answer: Future cash is worth less than present cash due to the time value of money

    NPV reflects the time value of money principle: a dollar available today is worth more than a dollar received in the future because of its earning potential.

  4. A contract's 'burn rate' refers to:

    Answer: The speed at which contract funds are being expended relative to the schedule

    Burn rate measures how quickly a contractor is consuming contract funding compared to the planned spending profile and schedule.

  5. Under the Earned Value Management System (EVMS), a Cost Performance Index (CPI) of 0.85 means:

    Answer: For every dollar spent, only 85 cents of work value is being produced

    A CPI of 0.85 indicates cost inefficiency — the contractor is getting only $0.85 of earned value for each $1.00 actually spent.

  6. When a contracting officer determines a price is 'fair and reasonable,' the standard applied is:

    Answer: The price is what a prudent person would pay in a competitive marketplace

    FAR defines fair and reasonable as a price that a prudent buyer would pay in a competitive market, considering all relevant factors.

  7. In federal contracting, 'should-pay' analysis differs from 'should-cost' analysis in that it:

    Answer: Focuses on what the government is legally obligated to pay under the contract terms

    Should-pay analysis determines the government's legal payment obligation under existing contract terms, while should-cost analyzes what efficient performance would cost.