CFI CBCA Financial Analysis for
Credit FINAL EXAM QUESTIONS
WITH CORRECT SOLUTIONS||100%
GUARNTEED PASS||UPDATED
2026/2027 SYLLABUS||A+
GRADED||<<RECENT VERSION>>
Optimal Timing - ANSWER ✓ • Can be matched to the asset and its cash flow
Equity in Comparison:
• Permanent capital
• Rarely matches the timing of an investment
Non Dilutive to Shareholders - ANSWER ✓ • Does not increase the number of
shares outstanding
Equity in Comparison:
• Results in dilution for existing investors
Effective Capital Structures
Companies that are financed 100% with equity are typically - ANSWER ✓ in the
very early stage of high growth.
Cost % vs Leverage % - ANSWER ✓ Firm value, cost of funds, debt is expensive,
sweet spot, pay out more dividends, buy back shares
Common shares are those - ANSWER ✓ issued to shareholders without any
guarantee of a dividend.
Equity - Common Shares - ANSWER ✓ Voting Rights
Liquidation
Residual Claims
,Voting Rights - ANSWER ✓ A right to vote on appointments to the board of
directors
Liquidation - ANSWER ✓ Last group to be paid out in the case of a liquidation
Residual Claims - ANSWER ✓ Receive residual amounts after all other creditors
Many prudent lenders will include - ANSWER ✓ preferred share dividends as
annual obligations when calculating coverage ratios.
Most borrowers in business and commercial banking will be - ANSWER ✓
privately held firms, predominantly made up of common shares.
Equity - Preferred Shares - ANSWER ✓ Estate Freezes Business Ownership
Planning Transfer of Ownership
Business Ownership Planning - ANSWER ✓ • Intergenerational succession
planning
Transfer of Ownership - ANSWER ✓ • Third-party equity as pref. shares
• Common in public markets
Different types of preferred shares have different impacts on a company. -
ANSWER ✓ Cumulative preferred shares have a fixed rate of divided,
accumulates if unpaid in any period. 2 Participating preferred shares entitle
preferred shareholders to additional profits. Convertible preferred shares provide
the investor with the opportunity to convert into common 4 shares at a specified
future date. A retractable preferred share is a preferred share that can be repaid at a
specified price at a 5 maturity date.
Cumulative preferred shares - ANSWER ✓ have a fixed rate of dividend,
accumulates if unpaid in any period
Participating preferred shares - ANSWER ✓ entitle preferred shareholders to
additional profits
Redeemable preferred shares - ANSWER ✓ may be redeemed at the call of the
company or the investor.
, Convertible preferred shares - ANSWER ✓ provide the investor with the
opportunity to convert into common shares at a specified future date.
A retractable preferred share - ANSWER ✓ is a preferred share that can be repaid
at a specified price at a maturity date.
Equity - Preferred Shares Example
Consider the impact preferred shares have on servicing and leverage. - ANSWER
✓ -1,000 shares
-Issued at $1, redeemable at $10,000
-Redemption value is $10,000,000
-Must add back $10 million into current and non-current liabilities
When calculating different ratios, the redeemable preferred shares can have a
significant negative impact.
Equity
Share Capital and Retained Earnings (not cash) - ANSWER ✓ Share capital - Pref.
shares and common equity
Retained Earnings - Profits (dividends increase) and Losses (dividends decrease)
Ratio Analysis
Financial Ratios
Leverage - ANSWER ✓ Measuring and assessing a firm's leverage is done using
two types of ratios.
Capital Structure and Debt to Cash Flow
Leverage ratios examples - ANSWER ✓ Interest Bearing Debt / Total
Shareholders' Equity
Total Liabilities / Tangible Net Worth
Total Debt / EBITDA
Funded debt is any - ANSWER ✓ interest-bearing obligation from a creditor, like
a financial institution, an equipment finance group, or a commercial mortgage
lender
The funded debt includes both - ANSWER ✓ the current and long-term portion.
Credit FINAL EXAM QUESTIONS
WITH CORRECT SOLUTIONS||100%
GUARNTEED PASS||UPDATED
2026/2027 SYLLABUS||A+
GRADED||<<RECENT VERSION>>
Optimal Timing - ANSWER ✓ • Can be matched to the asset and its cash flow
Equity in Comparison:
• Permanent capital
• Rarely matches the timing of an investment
Non Dilutive to Shareholders - ANSWER ✓ • Does not increase the number of
shares outstanding
Equity in Comparison:
• Results in dilution for existing investors
Effective Capital Structures
Companies that are financed 100% with equity are typically - ANSWER ✓ in the
very early stage of high growth.
Cost % vs Leverage % - ANSWER ✓ Firm value, cost of funds, debt is expensive,
sweet spot, pay out more dividends, buy back shares
Common shares are those - ANSWER ✓ issued to shareholders without any
guarantee of a dividend.
Equity - Common Shares - ANSWER ✓ Voting Rights
Liquidation
Residual Claims
,Voting Rights - ANSWER ✓ A right to vote on appointments to the board of
directors
Liquidation - ANSWER ✓ Last group to be paid out in the case of a liquidation
Residual Claims - ANSWER ✓ Receive residual amounts after all other creditors
Many prudent lenders will include - ANSWER ✓ preferred share dividends as
annual obligations when calculating coverage ratios.
Most borrowers in business and commercial banking will be - ANSWER ✓
privately held firms, predominantly made up of common shares.
Equity - Preferred Shares - ANSWER ✓ Estate Freezes Business Ownership
Planning Transfer of Ownership
Business Ownership Planning - ANSWER ✓ • Intergenerational succession
planning
Transfer of Ownership - ANSWER ✓ • Third-party equity as pref. shares
• Common in public markets
Different types of preferred shares have different impacts on a company. -
ANSWER ✓ Cumulative preferred shares have a fixed rate of divided,
accumulates if unpaid in any period. 2 Participating preferred shares entitle
preferred shareholders to additional profits. Convertible preferred shares provide
the investor with the opportunity to convert into common 4 shares at a specified
future date. A retractable preferred share is a preferred share that can be repaid at a
specified price at a 5 maturity date.
Cumulative preferred shares - ANSWER ✓ have a fixed rate of dividend,
accumulates if unpaid in any period
Participating preferred shares - ANSWER ✓ entitle preferred shareholders to
additional profits
Redeemable preferred shares - ANSWER ✓ may be redeemed at the call of the
company or the investor.
, Convertible preferred shares - ANSWER ✓ provide the investor with the
opportunity to convert into common shares at a specified future date.
A retractable preferred share - ANSWER ✓ is a preferred share that can be repaid
at a specified price at a maturity date.
Equity - Preferred Shares Example
Consider the impact preferred shares have on servicing and leverage. - ANSWER
✓ -1,000 shares
-Issued at $1, redeemable at $10,000
-Redemption value is $10,000,000
-Must add back $10 million into current and non-current liabilities
When calculating different ratios, the redeemable preferred shares can have a
significant negative impact.
Equity
Share Capital and Retained Earnings (not cash) - ANSWER ✓ Share capital - Pref.
shares and common equity
Retained Earnings - Profits (dividends increase) and Losses (dividends decrease)
Ratio Analysis
Financial Ratios
Leverage - ANSWER ✓ Measuring and assessing a firm's leverage is done using
two types of ratios.
Capital Structure and Debt to Cash Flow
Leverage ratios examples - ANSWER ✓ Interest Bearing Debt / Total
Shareholders' Equity
Total Liabilities / Tangible Net Worth
Total Debt / EBITDA
Funded debt is any - ANSWER ✓ interest-bearing obligation from a creditor, like
a financial institution, an equipment finance group, or a commercial mortgage
lender
The funded debt includes both - ANSWER ✓ the current and long-term portion.
