CBO Financial Planning & Analysis

Question 1

What is the primary objective of financial planning?

Accepted Answer

To allocate resources for achieving long-term goals

Answer

Financial planning is a strategic process that involves setting financial goals and creating a roadmap to achieve them. Its primary objective is to effectively allocate an organization's financial resources, including capital and revenue, to support both short-term operational needs and long-term strategic objectives. This ensures sustainable growth and financial stability.

Question 2

Which financial statement shows a company’s profitability over a period?

Accepted Answer

Income statement

Answer

The income statement, also known as the profit and loss (P&L) statement, summarizes a company's revenues, expenses, and profits or losses over a specific period. It provides a clear picture of the company's financial performance and profitability. This statement is crucial for assessing operational efficiency and financial health.

Question 3

What does a variance analysis help identify?

Accepted Answer

Differences between budgeted and actual results

Answer

Variance analysis is a financial tool used to identify and explain the differences, or variances, between planned (budgeted) financial performance and actual results. By pinpointing where actual outcomes deviate from expectations, businesses can investigate the causes and take corrective actions. This helps in improving future budgeting and operational control.

Question 4

Which ratio indicates a company’s ability to pay short-term obligations?

Accepted Answer

Current ratio

Answer

The current ratio is a liquidity ratio that measures a company's ability to pay off its short-term liabilities with its short-term assets. It is calculated by dividing current assets by current liabilities. A higher current ratio generally indicates a stronger ability to cover immediate obligations, signaling good short-term financial health.

Question 5

What is cash flow forecasting used for?

Accepted Answer

To predict future cash availability

Answer

Cash flow forecasting involves estimating the future inflows and outflows of cash over a specific period. Its purpose is to predict how much cash a business will have available at different points in time. This is crucial for managing liquidity, making informed investment decisions, and ensuring the company can meet its financial obligations.

(CBO) Certified Business Operator Practice Test

(CBO) Certified Business Operator Practice Test

CBO Financial Planning & Analysis