Financial Modelling MCQ With Answers: Exam Solved

FINANCIAL MODELING CONTENT
1. 1 to 8 Q&a
2. 9 to 16 Q&A
3. 17 to 24 Q&A
4. 25 to 32 Q&A

Financial Modeling Solved Questions and Answers

DISCLAIMER:- This is not for cheating purposes. This is useful to revise or prepare before the exam. It gives a rough idea about the exam.

FINANCIAL MODELLING Q&A 1 TO 8

Question 1 of 32
What is a toggle, as used with Excel in a financial model?

(A) It’s a cell that replaces inputs with outputs to test sensitivity.
(B) It’s an easy way to change the entire scenario behind the model.
(c) It’s a formula that produces a yes or no conclusion based on given assumptions.
(D)It’s a quick way to move from different cell values in Excel.

Question 2 of 32
In any financial model, what will always be the fundamental question?
(A) how the existing market trends can be ignored.
(B) how actual values can be placed into a theoretical model.
(C) how to assess the risk of future cash flow projections.
(D)how a particular investment can diversify your portfolio.

Question 3 of 32
You are considering an investment in a start-up company that has a brilliant idea no one has thought of before. Where will you start?

(A) Decide if the investment will generate enough cash to make it worthwhile.
(B) Look at the sources and uses of cash by the company.
(C) Evaluate the amount of debt involved in making the investment.
(D) Examine the balance sheet and goodwill of the company.

Question 4 of 32
As you begin to create a corporate finance model, what are the most important components you need to have answers to in order to deal with valuation, risk, and investments?

(A)The drivers of sales, profitability, and interest rates.
(B)The drivers of sales, costs, and profitability.
(C)The drivers of cost, rate of return, and future cash flows.
(D)The drivers of sales, available working capital, and cost.

Question 5 of 32
In using a top-down financial model, what assumptions must you make?

(A) What price are customers willing to pay, how will inflation affect sales price, and what is your company’s required internal rate of return.

(B) What will be the market sales growth every year, how much your share of the market will grow, and how much your order value will grow.

(C) What percentage of the market can you optimistically capture, how will your competitors react, and how much of the market will you retain.

(D) What will be the sales market sales growth every year, how much your order value will grow every year, and what your weighted cost of capital will be.

Question 6 of 32
How can Excel help you address the problem of interest rates significantly fluctuating over time?

(A) You can import FRED data into Excel.
(B) You can calculate a projected future rate in Excel.
(C) You can use the AVERAGE-IF function in Excel.
(D) You can use the AVERAGE OF function in Excel.

Question 7 of 32
Which federal government database is a good source of free economic data?

(A) FRED
(B) SAM
(C) BOB
(D) JOHN

Question 8 of 32
What is the objective of stress testing a model?

(A) To compute cash flows at the end of a period.
(B) To determine if a project should be completed.
(C) To forecast future sales for the firm.
(D) To see if the firm in question remains viable under negative economic circumstances.

Financial Modelling Q&A 9 To 16

Question 9 of 32
Excel identified a circular reference for interest paid on debt on the bottom of the sheet and also in net income interest. What should you do?

(A) You should rearrange the cells in the circular reference to be in different columns.
(B) You should hide one of the rows that has a cell included in the circular reference.
(C) You should replace the formula in net interest income with an actual value.
(D) You do not want to do anything with circular references because they provide value to your model.

Question 10 of 32
Which source of data will be most useful for modelling your company’s global market share?

(A) Federal Reserve
(B) Bureau of Labor Statistics
(C) Internal surveys
(D) US Census Bureau

Question 11 of 32
Which type of data do most financial models begin with?

(A) Internal
(B) public
(C) purchased
(D) proprietary

Question 12 of 32
What is the purpose of a toggle?

(A) To enable easy changing of assumptions in a model.
(B) To check accuracy of financial models.
(C) To avoid errors in formulas in financial models.
(D) To create rigid fixed assumptions in a model.

Question 13 of 32
What does the term terminal value refer to?

(A) The value of the asset or business in bankruptcy.
(B) The value of the asset or business at the end of the model period.
(C) The value of the asset or business at the start of the modeling period.
(D) The value of the asset or business when it is sold.

Question 14 of 32
You are an investor looking at a number of companies regarding their risk. In which model will you create a set of hypothetical outcomes that include the possible range of outcomes?

(A) the DCF Model analysis
(B) the Buyout Model analysis
(C) the Three-Statement Models analysis
(D) the Monte Carlo analysis

Question 15 of 32
Which of the following is a technical error that occurs in a financial model when data point A is based on datapoint B based on datapoint C which is based on datapoint A?

(A) Loop Reasoning
(B) Circular Reference
(C) Circular Reasoning
(D) Loop Reference

Question 16 of 32
Ignoring risk, which component will lead to the highest IRR?

(A) a higher level of debt
(B) the exit-stock multiple
(C) the level of cash flows
(D) upfront payments

Financial Modeling Q&a 17 To 24

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Question 17 of 32
What type of model technique enables a user to test assumptions to see how they impact outcomes?

(A) Waterfall Analysis
(B) Corkscrew Analysis
(C) Sensitivity Analysis
(D) Top-Down analysis

Question 18 of 32
What is this course about?

(A) financial theory
(B) economic modelling
(C) financial modelling
(D) economic theory

Question 19 of 32
What does the corkscrew relationship mean?

(A) Debt at the end of one period is expected to be greater than the debt at the start of the next year.
(B) Takeaways from a buyout model do not depend on information in the DCF model or in the three-statement model.
(C) Cash flows pay for operations, then senior debt service, then debt service reserves, then return to the equity investors.
(D) The value of a variable at the end of one year is related to the value in the next year.

Question 20 of 32
Which of the following is NOT an advanced modelling technique?

(A) Zippers
(B) Waterfalls
(C) Corkscrews
(D) Toggles

Question 21 of 32
To calculate a terminal value, you multiply the previous year’s free cash flow by one plus the, then divide by the discount rate minus the _.

(A) return on assets; growth rate
(B) growth rate; growth rate
(C) discount rate; growth rate
(D) growth rate; market share growth

Question 22 of 32
Which business area would be unlikely to use financial modelling?

(A) Equity Research
(B) Human Resources
(C) FP&A
(D) Commercial Banking

Question 23 of 32
It is time to update a model that only ran through 2019. Which steps will you take to update the fair value of your company’s stock?

(A) Use a reasonable growth rate, then adjust the inputs in the model that rely on stock value with the most recent information.

(B) Use a reasonable growth rate, then adjust the inputs in the model that rely on stock value by the ending year in your previous model.
(C) Use a reasonable growth rate, then adjust the inputs in the model that rely on stock value by the growth rate you used.
(D) Use a reasonable growth rate, then adjust the inputs in the model that rely on stock value by the average in your previous model.

Question 24 of 32
Which component in the financial valuation model is usually the most challenging?

(A) determining the terminal value
(B) computing the valuation on an asset
(C) calculating future cash flows
(D) determining the discount rate

Financial Modeling Q&a 25 To 32

Question 25 of 32
Which of the following is an approach used by the financial model to value Bitcoin?

(A) The Miner’s Cost Approach
(B) The Miner’s Survey Approach
(C) The User’s Survey Approach
(D) The Miner’s Revenue Approach

Question 26 of 32
Why would you perform sensitivity analysis?

(A) to use consistent averages when projecting future values for all model rows
(B) to evaluate the impact of the change in a single value on the entire model
(C) to evaluate the viability of extending your forecast even further into the future
(D) to recheck the model when all projections are converted to worst-case-scenario values

Question 27 of 32
Which is the last step in building a financial model?

(A) computation
(B) change
(C) valuation
(D) development

Question 28 of 32
What key criterion drives projections of sales in a three-statement model?

(A) Expense CAGR
(B) Expense ETF
(C) Sales CAGR
(D) Sales ETF

Question 29 of 32
How would you calculate the changes in working capital on the statement of cash flows from data in the income statement?

(A) Find the difference between the current assets and the total cash from operations.
(B) Find the change in the difference between current assets and current liabilities.
(C) Find the sum of the current assets and the current liabilities.
(D) Find the sum of the accumulated depreciation and the change in inventory.

Question 30 of 32
What do you subtract interest expense from to get net income before taxes?

(A) operating income
(B) operating expenses
(c) total operating expenses
(D) total revenue

Question 31 of 32
What type of financial model enables a user to forecast future financials based on a firm’s income statement, balance sheet, and cash flow statement?

(A) Waterfall Model
(B) Three-statement model
(C) Buyout model
(D) Corkscrew model

Question 32 of 32
Which schedule provides financial data on depreciation?

(A) capital assets
(B) equity capital
(C) net income
(D) working capital balance

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