CFI CBCA™ CERTIFICATION MASTER PACK 2026/2027 | ALL CORE & ELECTIVE
ASSESSMENTS | 100% VERIFIED QUESTIONS AND EXPLAINED CORRECT ANSWERS
|NEWEST VERSION (PASS GUARANTEE)
1. Which of the following best describes the primary goal of corporate
finance?
A. Maximising revenue
B. Maximising shareholder value
C. Minimising tax liabilities
D. Maximising employee compensation
ANSWER : B. Maximising shareholder value
Explanation: The primary goal of corporate finance is to maximise
shareholder value through financial planning, capital investment decisions,
and efficient use of resources.
2. What does WACC stand for in corporate finance?
A. Weighted Average Cost of Capital
B. Weighted Annual Capital Cost
C. Working Asset Capital Charge
D. Weighted Allocation of Corporate Capital
ANSWER : A. Weighted Average Cost of Capital
Explanation: WACC (Weighted Average Cost of Capital) represents a firm's
overall cost of capital, blending the cost of equity and cost of debt
proportionally.
3. In a discounted cash flow (DCF) analysis, the terminal value accounts for:
A. Cash flows in the first year
B. Cash flows beyond the explicit forecast period
C. The initial capital investment
, D. Working capital adjustments
ANSWER : B. Cash flows beyond the explicit forecast period
Explanation: Terminal value captures the value of all cash flows beyond the
explicit forecast period, typically calculated using the Gordon Growth Model
or exit multiple method.
4. Which valuation method is considered most rigorous for intrinsic
valuation?
A. Comparable company analysis
B. Precedent transaction analysis
C. Discounted cash flow analysis
D. Asset-based valuation
ANSWER : C. Discounted cash flow analysis
Explanation: DCF is considered the most rigorous intrinsic valuation
method as it values a company based on its own projected future cash flows,
independent of market sentiment.
5. EBITDA is calculated as:
A. Net income plus taxes
B. Revenue minus operating expenses
C. Earnings before interest, taxes, depreciation, and amortisation
D. Operating income minus capital expenditures
ANSWER : C. Earnings before interest, taxes, depreciation, and
amortisation
Explanation: EBITDA = Net Income + Interest + Taxes + Depreciation +
Amortisation. It is used as a proxy for operating cash flow and profitability.
6. Which financial statement reports a company's revenues and expenses
over a period?
A. Balance sheet
B. Cash flow statement
C. Income statement
D. Statement of retained earnings
, ANSWER : C. Income statement
Explanation: The income statement (also called the profit and loss
statement) reports revenues, expenses, and net income over a specific
accounting period.
7. Free cash flow to the firm (FCFF) is best described as:
A. Cash available after paying dividends
B. Cash generated after all operating expenses and capex, before
financing
C. Net income adjusted for working capital
D. Operating income minus interest expense
ANSWER : B. Cash generated after all operating expenses and capex,
before financing
Explanation: FCFF = EBIT(1-t) + D&A - CapEx - ΔNWC. It represents cash
available to all capital providers (debt and equity) before financing
payments.
8. In M&A, the 'control premium' refers to:
A. The fee paid to investment bankers
B. The premium paid above market price to acquire a controlling stake
C. Regulatory costs of the transaction
D. Premium paid for intellectual property
ANSWER : B. The premium paid above market price to acquire a
controlling stake
Explanation: A control premium is the extra amount paid above a target's
current market price to gain a controlling interest, typically ranging from
20% to 40%.
9. Net present value (NPV) of a project is positive when:
A. IRR equals the discount rate
B. The project generates no cash flow
C. The present value of inflows exceeds the present value of outflows
D. The payback period is less than one year
, ANSWER : C. The present value of inflows exceeds the present value of
outflows
Explanation: A positive NPV means the investment creates value because
the discounted future cash inflows exceed the initial outlay and discounted
costs.
10. Which of the following is NOT a component of the balance sheet?
A. Total assets
B. Shareholders' equity
C. Revenue
D. Long-term liabilities
ANSWER : C. Revenue
Explanation: Revenue is an income statement item, not a balance sheet
item. The balance sheet records assets, liabilities, and equity at a point in
time.
11. The Capital Asset Pricing Model (CAPM) is used to calculate:
A. Cost of debt
B. Cost of equity
C. Weighted average cost of capital
D. Enterprise value
ANSWER : B. Cost of equity
Explanation: CAPM calculates the required return on equity: Ke = Rf + β(Rm
- Rf), where Rf is the risk-free rate, β is beta, and (Rm - Rf) is the equity risk
premium.
12. An LBO (Leveraged Buyout) primarily uses which funding source?
A. Retained earnings
B. Equity from public markets
C. Significant debt financing
D. Government grants
ANSWER : C. Significant debt financing
ASSESSMENTS | 100% VERIFIED QUESTIONS AND EXPLAINED CORRECT ANSWERS
|NEWEST VERSION (PASS GUARANTEE)
1. Which of the following best describes the primary goal of corporate
finance?
A. Maximising revenue
B. Maximising shareholder value
C. Minimising tax liabilities
D. Maximising employee compensation
ANSWER : B. Maximising shareholder value
Explanation: The primary goal of corporate finance is to maximise
shareholder value through financial planning, capital investment decisions,
and efficient use of resources.
2. What does WACC stand for in corporate finance?
A. Weighted Average Cost of Capital
B. Weighted Annual Capital Cost
C. Working Asset Capital Charge
D. Weighted Allocation of Corporate Capital
ANSWER : A. Weighted Average Cost of Capital
Explanation: WACC (Weighted Average Cost of Capital) represents a firm's
overall cost of capital, blending the cost of equity and cost of debt
proportionally.
3. In a discounted cash flow (DCF) analysis, the terminal value accounts for:
A. Cash flows in the first year
B. Cash flows beyond the explicit forecast period
C. The initial capital investment
, D. Working capital adjustments
ANSWER : B. Cash flows beyond the explicit forecast period
Explanation: Terminal value captures the value of all cash flows beyond the
explicit forecast period, typically calculated using the Gordon Growth Model
or exit multiple method.
4. Which valuation method is considered most rigorous for intrinsic
valuation?
A. Comparable company analysis
B. Precedent transaction analysis
C. Discounted cash flow analysis
D. Asset-based valuation
ANSWER : C. Discounted cash flow analysis
Explanation: DCF is considered the most rigorous intrinsic valuation
method as it values a company based on its own projected future cash flows,
independent of market sentiment.
5. EBITDA is calculated as:
A. Net income plus taxes
B. Revenue minus operating expenses
C. Earnings before interest, taxes, depreciation, and amortisation
D. Operating income minus capital expenditures
ANSWER : C. Earnings before interest, taxes, depreciation, and
amortisation
Explanation: EBITDA = Net Income + Interest + Taxes + Depreciation +
Amortisation. It is used as a proxy for operating cash flow and profitability.
6. Which financial statement reports a company's revenues and expenses
over a period?
A. Balance sheet
B. Cash flow statement
C. Income statement
D. Statement of retained earnings
, ANSWER : C. Income statement
Explanation: The income statement (also called the profit and loss
statement) reports revenues, expenses, and net income over a specific
accounting period.
7. Free cash flow to the firm (FCFF) is best described as:
A. Cash available after paying dividends
B. Cash generated after all operating expenses and capex, before
financing
C. Net income adjusted for working capital
D. Operating income minus interest expense
ANSWER : B. Cash generated after all operating expenses and capex,
before financing
Explanation: FCFF = EBIT(1-t) + D&A - CapEx - ΔNWC. It represents cash
available to all capital providers (debt and equity) before financing
payments.
8. In M&A, the 'control premium' refers to:
A. The fee paid to investment bankers
B. The premium paid above market price to acquire a controlling stake
C. Regulatory costs of the transaction
D. Premium paid for intellectual property
ANSWER : B. The premium paid above market price to acquire a
controlling stake
Explanation: A control premium is the extra amount paid above a target's
current market price to gain a controlling interest, typically ranging from
20% to 40%.
9. Net present value (NPV) of a project is positive when:
A. IRR equals the discount rate
B. The project generates no cash flow
C. The present value of inflows exceeds the present value of outflows
D. The payback period is less than one year
, ANSWER : C. The present value of inflows exceeds the present value of
outflows
Explanation: A positive NPV means the investment creates value because
the discounted future cash inflows exceed the initial outlay and discounted
costs.
10. Which of the following is NOT a component of the balance sheet?
A. Total assets
B. Shareholders' equity
C. Revenue
D. Long-term liabilities
ANSWER : C. Revenue
Explanation: Revenue is an income statement item, not a balance sheet
item. The balance sheet records assets, liabilities, and equity at a point in
time.
11. The Capital Asset Pricing Model (CAPM) is used to calculate:
A. Cost of debt
B. Cost of equity
C. Weighted average cost of capital
D. Enterprise value
ANSWER : B. Cost of equity
Explanation: CAPM calculates the required return on equity: Ke = Rf + β(Rm
- Rf), where Rf is the risk-free rate, β is beta, and (Rm - Rf) is the equity risk
premium.
12. An LBO (Leveraged Buyout) primarily uses which funding source?
A. Retained earnings
B. Equity from public markets
C. Significant debt financing
D. Government grants
ANSWER : C. Significant debt financing
