Practice Test Geeks(CCM) Certified Credit Manager Practice Test
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Financial Management & Budgeting Flashcards

7 cards from real CCM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Financial Management & Budgeting flashcards as text

  1. A credit manager notices a customer's accounts payable days have increased from 30 to 75 days. What does this most likely signal?

    Answer: Potential liquidity problems or cash flow strain

    A sharp increase in payable days often signals the customer is stretching payments to preserve cash, which can indicate underlying liquidity stress.

  2. Net present value (NPV) analysis is used in financial management primarily to:

    Answer: Evaluate whether future cash flows justify a current investment

    NPV discounts projected future cash flows back to the present using a required rate of return, and a positive NPV indicates the investment adds value.

  3. Which of the following best describes the concept of working capital management for a credit manager?

    Answer: Balancing current assets and current liabilities to maintain liquidity

    Working capital management involves optimizing the balance between current assets (receivables, inventory, cash) and current liabilities to ensure the company can meet short-term obligations.

  4. A company reports gross profit of $800,000 on net sales of $2,000,000. What is the gross profit margin?

    Answer: 40%

    Gross profit margin = ($800,000 ÷ $2,000,000) × 100 = 40%, representing the percentage of revenue retained after direct production costs.

  5. When using the indirect method on the statement of cash flows, depreciation is added back to net income because:

    Answer: It is a non-cash expense that reduced net income but did not use cash

    Depreciation reduces net income on the income statement but involves no cash outflow, so it must be added back when reconciling net income to operating cash flow.

  6. Which budgeting approach allocates overhead costs based on the specific activities that drive those costs?

    Answer: Activity-based budgeting

    Activity-based budgeting links resource consumption to cost drivers and activities, providing a more accurate allocation of overhead than traditional volume-based methods.

  7. A customer's Altman Z-score falls below 1.81. According to the model, this suggests:

    Answer: The company faces significant financial distress and high bankruptcy risk

    An Altman Z-score below 1.81 places a company in the distress zone, indicating a high probability of financial failure within two years.