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Financial Modeling & Valuation Analyst (FMVA)® Certification -CFI Quiz Answer

CFI’s Financial Modeling & Valuation Analyst (FMVA)® Certification Program will teach you essential skills required to perform practical financial analysis. Financial models are a critical part of the decision-making process in the finance industry today. By following our recommended financial modeling courses, students learn the best way to structure their models to instill confidence in the stakeholders involved in the decision-making process.

Reading Financial Statements

Which is the best description of authorized shares?

  • The total amount of shares that can be sold
  • The total amount of shares held by the directors
  • The total amount of shares that can be publicly traded
  • The total amount of shares a company has received cash for

Which is not a type of note found in a set of financial statements?

  • Significant internal controls
  • Indirect information
  • Significant accounting policies
  • Direct information

Where would unearned revenue most likely appear in a set of financial statements?

  • In the Balance Sheet as a liability
  • In the Balance Sheet as an asset
  • In the Income Statement after Operating Profit
  • In the Income Statement before Gross Profit

Which is not an example of an intangible asset?

  • A copyright
  • A patent
  • A trademark
  • A computer

What will a contingency note contain?

  • A disclosure of all future commitments of the company
  • A disclosure of future contracts to be performed
  • A circumstance where a company may have a liability
  • A set of criteria required to be able to recognize revenue

Where would advertising costs normally be found?

  • On the income statement, within cost of sales
  • On the balance sheet, within intangible assets
  • On the balance sheet, within contingent liabilities
  • On the income statement, within selling, general and administration

What is an advantage to using a multi-step income statement?

  • All income items are grouped in one section, and all expenses in another
  • Direct expenses and indirect expenses are broken out separately
  • Net Income is shown before income taxes
  • The fixed costs and variable costs are broken out separately

Which of the following is an example of an investing activity?

  • Prepayment of a contract
  • Repayment of long term debt
  • Purchase of machinery
  • Issuance of shares

Which statement does NOT describe operating cash flows?

  • Cash Paid for New Factory Equipment
  • Employee Salaries
  • Cash Paid to Suppliers
  • Cash Received from Customers

What would you find on the Management’s Discussion and Analysis (MD&A) Section of an Annual Report?

  • A review of the company’s past performance
  • List of future actions that the company plans on taking
  • Key risks facing the organization
  • All of the above

Corporate Finance Fundamentals

Which of the following best describes a best efforts underwriting commitment?

  • Underwriter is only responsible for half (50%) of the issue.
  • If the entire issue cannot be sold at the offering price, the deal is called off and the issuing company receives nothing.
  • The underwriter agrees to buy the entire issue and assume full financial responsibility for any unsold shares.
  • Underwriter commits to selling as much of the issue as possible at the agreed-on offering price but can return any unsold shares to the issuer without financial responsibility.
Free Cash Flow 100
Growth rate2%
Tax Rate 1%
Cost of Capital5%
Debt-to-total value50%

Given the data in the above table, what is the terminal value of the business (using the growing perpetuity formula)?

  • 3400
  • 3000
  • 3366
  • 3600
Cash100,000
Debt60,000
Tax Rate10%
Discount Rate6%
Enterprise Value500,000
Perpetual Growth Rate4%

Given the data in the above table, calculate market capitalization of this hypothetical company. 

  • $400,000
  • $540,000
  • $100,000
  • $460,000
Cost of Equity5%
Cost of debt7%
% Debt60%
% Equity40%

Given the data in the above table, what is the weighted average cost of capital of this company?

  • 3.7%
  • 5.9%
  • 4.0%
  • 6.2%

Which of the following companies has the lowest degree of leverage?

  • 90% Debt, 10% Equity
  • 30% Debt, 70% Equity
  • 50% Debt, 50% Equity
  • 20% Debt, 80% Equity

Which of the following statements is correct?

  • Financial buyers are institutions that provide capital and are not operators.
  • Financial buyers are operating partners that try to create synergies.
  • Strategic buyers are asset managers that are trying to time the purchase or sale of a business.
  • Strategic buyers are institutions that provide capital and are not operators.

Which of the following is the correct ordering of the capital stack (from most secure to least secure)?

  • Senior debt -> Subordinated debt-> Equity
  • Senior debt -> Equity -> Subordinated debt
  • Subordinated debt -> Senior debt -> Equity
  • Equity -> Subordinated debt -> Senior debt

Which of the following debt repayment profiles involves a growing / accrued interest amount over time?

  • Senior Debt
  • Mezzanine finance
  • Equity
  • Pay in kind debt

Which of the following statements about capital structure are correct? Select ALL correct answers.

  • A company should always finance its business using as much debt as possible in order to optimize the capital structure.
  • Having too much equity may dilute earnings and the value of the original investors.
  • Having too little debt may increase the risk of default in repayment.
  • A company needs to consider the current economic climate when making decisions on debt and equity proportions.

Which of the following is NOT a form of subordinated debt?

  • Revolver
  • Vendor Notes
  • Payment-In-Kind Notes
  • High yield bonds

Which of the following best describes a leveraged buyout fund’s acquisitions?

  • Investing in mid-sized businesses
  • Investing in foreign businesses
  • Investing in mature businesses
  • Investing in early stage businesses

Which of the following are examples of institutional investors? Select ALL correct answers.

  • High net worth individuals
  • Companies that are publicly traded on stock exchanges
  • Mutual funds
  • Private equity firms

Which of the following is not a function of public accounting firms?

  • Transaction Advisory
  • Audit
  • Financial Planning & Analysis
  • Due dilligence

Which of the following M&A transaction equations is correct?

  • Value created = Stand-alone value + Net synergies – Transaction costs
  • Value created = Consideration (price paid) + Net synergies – Transaction costs
  • Value created = Stand-alone value + Net synergies – Consideration (price paid)
  • Value created = Hard synergies + Soft synergies – Transaction costs

What should a company do if it wants to reduce the number of shares outstanding?

  • Issue more debt
  • Repurchase shares
  • Invest in more projects
  • Pay cash dividends

Capital IQ Fundamentals

Which function on the Capital IQ platform allows users to receive notifications when there are any news or key developments entered for selected companies?

  • Coverage Tracking
  • Projects
  • Company Screening
  • Alerts

Which of the following information is not displayed on a company’s profile (tearsheet) page on Capital IQ?

  • Analyst coverage
  • S&P Global credit ratings
  • Stock quote
  • Current and pending investors

On the Capital IQ platform when a user looks up the annual financial statement of a U.S. publicly listed company and click into one of the data points until the very last link, it will bring the user to the original data taken from:

  • The company’s annual report on its company website
  • The company’s 10-K filing
  • The company’s 10-Q filing
  • Capital IQ’s database

Where can Capital IQ users find information on sector performance such as market cap, total enterprise value, and total number of transactions in the last three months in each sector?

  • Companies -> Industry specific financials
  • Markets -> Industry
  • Markets -> M&A
  • Screening -> Transactions

According to the following screening criteria, how many public companies are there in the United States and Canada with a market capitalization of over CAD 500MM?

According to the following screening criteria, how many public companies are there in the United States and Canada with a market capitalization of over CAD 500MM?
  • 13,567
  • 501
  • 2,699
  • 294

According to the screening criteria below, which of the following description is the most accurate?

According to the screening criteria below, which of the following description is the most accurate?
  • There are 74 public companies in the oil, gas and consumable fuels industry with an enterprise value of over CAD 1 billion
  • There are 74 transactions of over CAD 1 billion in value where the target and the buyer are both public companies and the target company is in the oil, gas and consumable fuels industry
  • There are 74 public companies in the oil, gas and consumable fuels industry which have been involved in a transaction of over CAD 1 billion in value
  • There are 74 transactions of over CAD 1 billion in value where the target and the buyer are both public companies

Which of the following statements is true based on the following chart displaying the change in the S&P 500 Index and share pricing of Zoom Video Communications, Inc. for the past year?

Which of the following statements is true based on the following chart displaying the change in the S&P 500 Index and share pricing of Zoom Video Communications, Inc. for the past year?
  • The stock of Zoom Video Communications, Inc. has outperformed the S&P 500 Index since December 2019
  • The stock of Zoom Video Communications, Inc. has underperformed the S&P 500 Index since February 2020
  • The stock of Zoom Video Communications, Inc. has significantly outperformed the S&P 500 Index since February 2020
  • The stock of Zoom Video Communications, Inc. has underperformed the S&P 500 Index since December 2019

What is the purpose of creating a coverage list on the Capital IQ platform?

  • To keep track of companies that may be clients or prospective clients of your group or firm
  • To manage and assess the performance and returns on your investments
  • To share information about active and completed projects with your organization
  • To receive notifications when there are updates on or new key developments by selected companies

Which function of the S&P Capital IQ Excel plug-in allows users to extract company data directly from CapIQ’s database and calculate the desired financial metrics using the CapIQ formulas?

  • Screening
  • Templates
  • Formula Builder
  • Auditing

Which CapIQ template is shown below?

Which CapIQ template is shown below?
  • DCF Template
  • WACC Template
  • One Page Company Tearsheet
  • Standard Financials

Macabacus Fundamentals

Suppose in an Excel spreadsheet, the value in cell A1 is 25. By using the Macabacus local currency cycle shortcuts (Ctrl + Shift + 4) and pressing 4 two times, how will the value in cell A1 display?

  • $25.00
  • $25.0
  • $25
  • $25.000

The following image shows the number of orders Company A received in 2015-2020. A financial analyst wants to calculate the year-over-year growth rate of the orders and has entered the formula for 2016 in cell C4. What steps should the analyst take to apply the same formula to all adjacent years using the Macabacus’ Fast Fill Right shortcuts?

The following image shows the number of orders Company A received in 2015-2020. A financial analyst wants to calculate the year-over-year growth rate of the orders and has entered the formula for 2016 in cell C4. What steps should the analyst take to apply the same formula to all adjacent years using the Macabacus’ Fast Fill Right shortcuts?
  • Press Shift + Right Arrow to select cells C4 to G4, then press Ctrl + R
  • Press Ctrl + Shift + Right Arrow to select cells C4 to G4, then press Ctrl + R
  • Select cell C4, then press Ctrl + R
  • Select cell C4, then press Ctrl + Shift + R

What do Macabacus’ Error Wrap shortcuts do?

  • Correct inconsistent formulas in the selected cell range to match with the formula in the first cell
  • Replace multiple Excel functions in selected formulas at once with the cell references or values to which those functions evaluate
  • Paste copied cells preserving original formulas
  • Adjust formulas of selected cells to replace errors from existing formulas with custom error messages or values using an IFERROR wrapper

Suppose you would like to copy the formula in cell B6 to C6 while keeping the same cell references (i.e. C4/C3). Which Macabacus shortcuts should you use?

Suppose you would like to copy the formula in cell B6 to C6 while keeping the same cell references (i.e. C4/C3). Which Macabacus shortcuts should you use?
  • Simplify Formula
  • Fast Fill Right
  • Paste Duplicate
  • Percent Cycle

Which of the following is NOT a feature in the Formulas menu of the Macabacus Excel add-in?

  • Quick CAGR
  • Error Wrap
  • Formula Flow
  • Summary Statistics

All of the following features in the Macabacus Excel add-in helps users identify inconsistent formulaic structure or potential errors within a cell range EXCEPT

  • Pro Precedents
  • Formula Flow
  • Uniformulas
  • Dependency Density

Which Macabacus add-in feature automatically calculates the column totals in the data table and inserts them into the column chart as displayed on the right?

Which Macabacus add-in feature automatically calculates the column totals in the data table and inserts them into the column chart as displayed on the right?
  • Charts -> Stacked Totals -> Stacked Bar Totals
  • Charts -> Growth Arrow
  • Charts -> Stacked Totals -> Stacked Column Totals
  • Charts -> Label Points

Which of the following is not an advantage of using Macabacus’ Export to PowerPoint/Word features in the Excel add-in?

  • It removes all the gridlines and reformats all text to consistent font colors
  • It automatically hides error checking and cell comment indicators
  • The links to Excel source ranges can be edited directly on the PowerPoint add-in
  • Exported object/text in PowerPoint/Word are linked to Excel data and can be refreshed within the Excel add-in when the data is modified

Users can insert watermarks (e.g. CONFIDENTIAL, DRAFT) into presentation slides using the ______ feature in Macabacus’ PowerPoint add-in.

  • Master Shapes
  • Proof
  • Library
  • Agenda

Which of the following inspections does Macabacus’ Proofing feature perform to check for errors and inconsistencies in PowerPoint slides?

  • All of the above
  • Repeated words
  • Abbreviation inconsistencies
  • Image distortion

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