Practice Test Geeks(CCM) Certified Commercial Manager Practice Test
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Financial Analysis & Planning 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 Analysis & Planning flashcards as text

  1. A company has a current ratio of 1.8 and a quick ratio of 0.9. What does this discrepancy most likely indicate?

    Answer: The company has significant inventory relative to current assets

    A large gap between current and quick ratios indicates that inventory makes up a significant portion of current assets, since the quick ratio excludes inventory.

  2. Which budgeting approach starts each period with a zero base and requires managers to justify all expenditures?

    Answer: Zero-based budgeting

    Zero-based budgeting (ZBB) requires every budget line item to be justified from scratch each period rather than adjusting prior-year figures.

  3. A project has an IRR of 14% and the company's WACC is 11%. What should management do?

    Answer: Accept the project because IRR exceeds WACC

    When IRR exceeds the cost of capital (WACC), the project creates value and should be accepted under the IRR decision rule.

  4. Contribution margin per unit is calculated as:

    Answer: Selling price minus variable cost per unit

    Contribution margin per unit equals the selling price minus variable cost per unit, showing how much each unit contributes toward covering fixed costs.

  5. A sensitivity analysis on a financial model primarily helps managers to:

    Answer: Understand how changes in key assumptions affect outcomes

    Sensitivity analysis tests how much the output (e.g., NPV or profit) changes when individual input assumptions are varied, highlighting the most critical variables.

  6. Which financial statement links the income statement and balance sheet by explaining changes in equity?

    Answer: Statement of changes in equity

    The statement of changes in equity reconciles opening and closing equity balances, incorporating net income, dividends, and other equity movements.

  7. Operating leverage measures the sensitivity of operating income to changes in:

    Answer: Sales volume

    Operating leverage reflects how a given percentage change in sales volume amplifies the percentage change in operating income, driven by the proportion of fixed costs.