CFI Exam Study Questions and Answers
Latest Version (2024/2025) Already
Passed
What is capital financing?
✔✔Capital financing refers to the process of raising funds for business operations, investments,
or expansions through equity, debt, or other financial instruments.
What is the primary purpose of capital financing?
✔✔To provide businesses or organizations with the necessary funds to support long-term
growth, asset acquisition, and operational stability.
What are the two main sources of capital financing?
✔✔Equity financing and debt financing.
What is equity financing?
✔✔Equity financing involves raising capital by selling ownership shares in a company, usually
through stock issuance or private investments.
1
,What is debt financing?
✔✔Debt financing is the process of borrowing money that must be repaid over time with
interest, typically through loans or bond issuance.
What is a bond in capital financing?
✔✔A bond is a fixed-income security where investors lend money to an entity in exchange for
periodic interest payments and the repayment of principal at maturity.
What is the difference between a loan and a bond?
✔✔A loan is a direct borrowing agreement between a borrower and a lender, while a bond is a
tradable debt instrument issued to multiple investors.
What is a capital structure?
✔✔A capital structure is the mix of debt and equity used by a company to finance its operations
and growth.
What is leverage in capital financing?
✔✔Leverage refers to the use of borrowed funds to increase potential returns on investment.
2
, What is a common risk of high financial leverage?
✔✔Increased debt obligations can lead to financial distress if the company struggles to meet
interest payments.
What is a dividend?
✔✔A dividend is a payment made by a company to its shareholders from its profits or retained
earnings.
What is retained earnings in capital financing?
✔✔Retained earnings are the portion of a company's profits that are reinvested in the business
rather than distributed as dividends.
What is working capital financing?
✔✔Working capital financing is short-term funding used to cover daily operational expenses,
such as payroll and inventory.
What is an initial public offering (IPO)?
✔✔An IPO is the process by which a private company offers its shares to the public for the first
time to raise capital.
3
Latest Version (2024/2025) Already
Passed
What is capital financing?
✔✔Capital financing refers to the process of raising funds for business operations, investments,
or expansions through equity, debt, or other financial instruments.
What is the primary purpose of capital financing?
✔✔To provide businesses or organizations with the necessary funds to support long-term
growth, asset acquisition, and operational stability.
What are the two main sources of capital financing?
✔✔Equity financing and debt financing.
What is equity financing?
✔✔Equity financing involves raising capital by selling ownership shares in a company, usually
through stock issuance or private investments.
1
,What is debt financing?
✔✔Debt financing is the process of borrowing money that must be repaid over time with
interest, typically through loans or bond issuance.
What is a bond in capital financing?
✔✔A bond is a fixed-income security where investors lend money to an entity in exchange for
periodic interest payments and the repayment of principal at maturity.
What is the difference between a loan and a bond?
✔✔A loan is a direct borrowing agreement between a borrower and a lender, while a bond is a
tradable debt instrument issued to multiple investors.
What is a capital structure?
✔✔A capital structure is the mix of debt and equity used by a company to finance its operations
and growth.
What is leverage in capital financing?
✔✔Leverage refers to the use of borrowed funds to increase potential returns on investment.
2
, What is a common risk of high financial leverage?
✔✔Increased debt obligations can lead to financial distress if the company struggles to meet
interest payments.
What is a dividend?
✔✔A dividend is a payment made by a company to its shareholders from its profits or retained
earnings.
What is retained earnings in capital financing?
✔✔Retained earnings are the portion of a company's profits that are reinvested in the business
rather than distributed as dividends.
What is working capital financing?
✔✔Working capital financing is short-term funding used to cover daily operational expenses,
such as payroll and inventory.
What is an initial public offering (IPO)?
✔✔An IPO is the process by which a private company offers its shares to the public for the first
time to raise capital.
3
