CFI Operational Modeling Final E x a m
Q u e s t i o n s a n d Answers
1. What are financial modeling guidelines and why are they relevant?
Answer A set of principles and guidance for financial modeling which promote consistency
across models used by all stakeholders.
2. What does the observed level of operational efficiency indicate?
Answer The company should consider additional capital expenditure to increase the
capacity of the plant.
3. Is the pricing forecast realistic?
Answer No. The degree of pricing power is not realistic as increased competition has
entered the market.
4. The only variable cost for your client's business is materials.
Calculate the average sales volume over the three-year historical
period provided.
Answer 2.5 million units.
5. For 2022, your client is expecting a sales volume of 4.5 million
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5
, units and an inflation rate of 4.0%. Calculate the total variable
costs in US dollars for 2022.
Answer $29.0 million.
6. In terms of gross-profit, which of the following periods likely
requires further investigation or analysis?
Answer Fiscal 2016 Margins appear to be lower than expected.
7. Consider EBITDA as a percentage of Revenue. What is a possible
reason for the observed EBITDA-margin in fiscal 2015?
Answer An increase in sales commissions to boost sales volumes.
8. What is the cost of goods sold primarily driven by for a given
period?
Answer Sales volume.
9. Why would an increase in the company's days in A/P produce
cash for a business?
Answer The company is 'stretching its payables' and deferring a cash outflow.
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5
Q u e s t i o n s a n d Answers
1. What are financial modeling guidelines and why are they relevant?
Answer A set of principles and guidance for financial modeling which promote consistency
across models used by all stakeholders.
2. What does the observed level of operational efficiency indicate?
Answer The company should consider additional capital expenditure to increase the
capacity of the plant.
3. Is the pricing forecast realistic?
Answer No. The degree of pricing power is not realistic as increased competition has
entered the market.
4. The only variable cost for your client's business is materials.
Calculate the average sales volume over the three-year historical
period provided.
Answer 2.5 million units.
5. For 2022, your client is expecting a sales volume of 4.5 million
1/
5
, units and an inflation rate of 4.0%. Calculate the total variable
costs in US dollars for 2022.
Answer $29.0 million.
6. In terms of gross-profit, which of the following periods likely
requires further investigation or analysis?
Answer Fiscal 2016 Margins appear to be lower than expected.
7. Consider EBITDA as a percentage of Revenue. What is a possible
reason for the observed EBITDA-margin in fiscal 2015?
Answer An increase in sales commissions to boost sales volumes.
8. What is the cost of goods sold primarily driven by for a given
period?
Answer Sales volume.
9. Why would an increase in the company's days in A/P produce
cash for a business?
Answer The company is 'stretching its payables' and deferring a cash outflow.
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5
