CFI CBCA FINANCIAL ANALYSIS FOR CREDIT UPDATED ACTUAL EXAM QUESTIONS CORRECT ANSWERS GRADED A PLUS

CFI CBCA FINANCIAL ANALYSIS FOR CREDIT UPDATED ACTUAL EXAM QUESTIONS
CORRECT ANSWERS GRADED A PLUS
CFI CBCA Financial Analysis for Credit Questions
and Answers Verified Solutions Latest Update
2026/2027

Question:
Course Objectives

Answer:
-Understand the components that go into financial analysis Calculate the key performance ratios that
credit professionals use to assess a company's profitability and efficiency Calculate the key financial
ratios used to assess a company's liquidity, leverage, and coverage Undertake a vertical analysis to
determine profitability from the income statement and proportionality from the balance sheet
Undertake horizontal analysis to spot trends and analyze their meaning Perform industry
benchmarking



Question:
Vertical & Horizontal Analysis

Answer:
Financial Analysis Overview



Question:
Financial analysis includes a number of steps to

Answer:
get a complete picture of the performance of a company. The starting point is the company's
financial statements.



Question:
Ratio analysis is great for

Answer:

,understanding the relationship between the income statement and the balance sheet.



Question:
Performing Financial Analysis Financial analysis must be undertaken with

Answer:
an end-purpose in mind. This will influence how you conduct and interpret your analysis.



Question:
Credit Analyst

Answer:
-Understand a company's overall financial health and a borrower's credit risk A company's ability to
service credit obligations and how to mitigate loan loss in a default scenario



Question:
Trend & Ratio Analysis

Answer:
Basic Ratio Analysis Adjusting Ratios for Distortion Complex Adjustments



Question:
Financial analysis is frequently conducted within the context of a specific borrowing request.
Lenders must

Answer:
overlay the proposed credit facilities and loan terms on top of financial results to see how financial
metrics are impacted.



Question:
A credit professional may conduct the analysis using

,Answer:
actual current/historical results, as well as using projected operating results.



Question:
There are two forms of financial analysis

Answer:
Vertical Analysis and Horizontal Analysis



Question:
Vertical Analysis

Answer:
• Proportional point of view Compares line items in a financial statement to a base figure (e.g.
express line items as % of revenue) Can be used with the income statement to understand
profitability Can be used with the balance sheet to understand asset/liability structure Helps
benchmark externally Helps benchmark against internal thresholds which flow through to a risk
rating Ratios can be compared to industry performance Set expectations and see if ratios fall within
expectations If ratios fall outside of expectations, they will help you ask questions of your client



Question:
Horizontal Analysis

Answer:
• Provides context both within the company's own performance and through comparisons with peer
groups Looks at trends in financial statements Benchmarks trends internally and externally against
peers across a time period Combining with vertical analysis provides more useful information
Allows for consideration of liquidity, solvency, and leverage ratios Example: Company A has
positive revenue growth of 5% year-over-year A good indicator, unless the industry was
outperforming it year-over-year Raises questions about sustainability, competitive advantage, and
strategy What is their strategy to improve their competitive advantage? What threats have they
identified and how are they mitigating them?



Question:

, Analyzing credit means

Answer:
identifying risk to repayment capacity. Falling behind industry trends can be indicative of a
company in decline



Question:
Ratio Analysis

Answer:
Performance Ratios Financial Ratios



Question:
Performance Ratios How profitable a company is and how efficiently it is being run

Answer:
Profitability Ratios Efficiency Ratios



Question:
Financial Ratios Financial condition of the company; liquidity, solvency, and how operating cash
flow covers principal & interest obligations

Answer:
Coverage Leverage Liquidity



Question:
Breaking down the income statement

Answer:
Sales Revenue Cost of Good Sold Gross Profit Indirect Costs Research & Development Marketing
& Sales