Financial Modeling & Forecasting Flashcards
7 cards from real CFP 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 Modeling & Forecasting flashcards as text
A fintech model forecasts customer lifetime value (LTV). If monthly churn increases from 2% to 4%, what happens to LTV assuming constant ARPU?
Answer: LTV is halved
LTV = ARPU / Churn Rate, so doubling churn from 2% to 4% cuts LTV in half since customer lifespan is halved.
Which Excel function is most appropriate for creating dynamic model assumptions that pull from a separate assumptions tab?
Answer: Named ranges or structured table references
Named ranges and structured table references create maintainable links to assumption inputs without fragile hardcoded cell references.
In a fintech IPO valuation model, the EV/Revenue multiple is preferred over P/E ratio because:
Answer: High-growth fintechs often have negative earnings but positive revenue
Pre-profit growth fintechs lack meaningful earnings, making EV/Revenue the practical valuation benchmark against comparable public companies.
A financial model's circular reference occurs when forecasting interest expense. What is the standard approach to resolve this?
Answer: Use an iterative calculation toggle or a prior period debt balance
Modelers resolve the interest-debt circularity by either enabling Excel iterative calculations or using the prior period ending debt balance as the interest base.
When stress testing a fintech lending model, a 'base, bear, bull' scenario framework is applied. What does the bear scenario typically assume?
Answer: Adverse conditions with higher defaults and lower originations
A bear scenario models downside risk by stress-testing elevated credit losses, reduced loan demand, and tighter funding conditions.
In a unit economics model for a neobank, which ratio directly measures how efficiently the bank acquires customers relative to their value?
Answer: LTV to CAC ratio
The LTV/CAC ratio compares lifetime customer value to acquisition cost; a ratio above 3x is generally considered a healthy SaaS/fintech benchmark.
A fintech model uses regression analysis to forecast default rates. The R-squared value is 0.85. What does this indicate?
Answer: 85% of the variance in default rates is explained by the independent variables
R-squared of 0.85 means the regression model's independent variables explain 85% of the variation in default rates, indicating strong explanatory power.