FINANCIAL MODELING FINAL PAPER 2025/2026
QUESTIONS WITH ANSWERS GRADED A+
✔✔Company A has 800 employees, and it decides to grant each of the employees 50
share options as part of its new rewards plan. The options are exercisable over 5 years
and subject to a 3-year service condition. The fair value of each option at the grant date
is $16. The company estimates that 80% of its employees will meet the service
condition required for receiving the options. Calculate the total share-based payment
expense for Company A assuming that 80% of the employees actually meet the service
condition. - ✔✔512,000
✔✔Which of the following is not a required criterion for a transaction to be considered a
business combination? - ✔✔Presence of outputs
✔✔Which of the following statements regarding the accounting for business
combinations is false? - ✔✔Goodwill is the difference between the consideration
transferred by the acquirer to the acquiree and the fair value of identifiable assets
acquired.
✔✔Debt issuance costs are: - ✔✔Amortized over the term of the related debt liability
✔✔Scenario and Sensitivity Analysis - ✔✔
✔✔If you want to test how an increase in percentage of cost of good sold affects the
contribution margin, you would use ________. - ✔✔Sensitivity Analysis
✔✔When performing a scenario analysis, which of the following tools/functions in Excel
is used to create a dropdown list where we can select the live case? - ✔✔Data
Validation
✔✔You should perform sensitivity analysis when: - ✔✔You need to determine which
assumptions matter the most
✔✔The formula contained in the yellow highlighted cell (I39) is = ( , I9,I24). This formula
can be copied over to the entire live scenario section without any manual modification.
(Hint: do not forget to use absolute references.) - ✔✔Choose, $I$4
✔✔What is the share price when the discount rate is 13% and revenue growth is 15%?
- ✔✔36.70
✔✔What is the share price when COGS increases by 5%? - ✔✔29.29
,✔✔The formula contained in the YELLOW cell (G179) is ___________ Hint: do not
forget the $ when using absolute references. Use absolute reference so this formula
can be copied over to other cells in this section without any manual modification. -
✔✔=SMALL($F$177:$F$180,E179)
✔✔The formula contained in the ORANGE cell (H178) is = ($A$177:$G$180, (
,$F$177:$F$180,0),MATCH($A$177,$A$177: $F$177,0))
Hint: do not forget the $ when using absolute references. - ✔✔Index, match, A177
✔✔What type of chart did we use to build a tornado chart? - ✔✔Stacked bar chart
✔✔Assumption Drivers in order - ✔✔
✔✔Financial Analysis Fundamentals - ✔✔
✔✔Which of the following items are not included when determining income from
operations? - ✔✔Taxes
✔✔Which ratio would you use to determine the profitability of the goods sold by a
company? - ✔✔Gross Profit
✔✔When performing a vertical analysis which income statement item do you use to
determine the cost contribution for each expense category? (What is the denominator?)
- ✔✔Sales
✔✔Horizontal analysis allows us to analyze performance over: - ✔✔Time
✔✔When calculating the quick ratio or "acid test" which current asset or liability is
omitted? - ✔✔Inventory
✔✔For which organization would you expect to see the highest inventory turnover ratio?
- ✔✔Grocery Retailer
✔✔What actions could a company take to reduce its working capital funding gap? -
✔✔Tighten customer credit terms
✔✔The debt to equity ratio indicates: - ✔✔The proportion of the company financed by
lenders versus owners
✔✔Which of the following items are not included in working capital? - ✔✔Short Term
Investments
, ✔✔When calculating turnover of property plant & equipment and receivables, which
item from the income statement do we use? - ✔✔Sales
✔✔If a company wanted to finance the purchase of equipment without diluting
shareholders equity, which of the following operation could it consider? - ✔✔Obtaining a
loan from a bank
✔✔Working capital movement is included in which section of the cash flow statement? -
✔✔Operating Activities
✔✔The debt to tangible net worth ratio is calculated as follows: - ✔✔Interest Bearing
Liabilities / (Equity - Intangible Assets)
✔✔If the total assets to equity ratio of a company is increasing, it is possible that: -
✔✔The company is increasing the use of debt and getting higher financial leverage
✔✔Which ratio is not one of the three ratios that multiply together to produce the return
on equity ratio? - ✔✔Operating profit margin
✔✔Which financial leverage ratio is used with two other ratios to mathematically
produce the return on equity ratio? - ✔✔Total Assets / Equity
✔✔Which of the following is a tertiary ratio that drives profitability? - ✔✔SG&A Expense
/ Sales
✔✔Which ratios indicate how efficiently the company generates sales from its assets? -
✔✔Working capital turnover
✔✔The net profit margin ratio can mathematically be broken down as "Tax impact x
Capital structure impact x..." - ✔✔EBIT/Sales
✔✔Based on the following information from ABC Company's financial analysis, which
one of the following statements is NOT true? - ✔✔The company's ability to cover its
short-term obligations is getting higher over the five years.
✔✔Operational Modeling - ✔✔
✔✔What are financial modeling guidelines and why are they relevant? - ✔✔A set of
principles and guidance for financial modeling which promote consistency across
models used by all stakeholders.
✔✔Safety Pro-Tech Inc. produces protective equipment. The company's primary source
of revenue is from the sale of N95 masks. The industry has seen considerable growth
QUESTIONS WITH ANSWERS GRADED A+
✔✔Company A has 800 employees, and it decides to grant each of the employees 50
share options as part of its new rewards plan. The options are exercisable over 5 years
and subject to a 3-year service condition. The fair value of each option at the grant date
is $16. The company estimates that 80% of its employees will meet the service
condition required for receiving the options. Calculate the total share-based payment
expense for Company A assuming that 80% of the employees actually meet the service
condition. - ✔✔512,000
✔✔Which of the following is not a required criterion for a transaction to be considered a
business combination? - ✔✔Presence of outputs
✔✔Which of the following statements regarding the accounting for business
combinations is false? - ✔✔Goodwill is the difference between the consideration
transferred by the acquirer to the acquiree and the fair value of identifiable assets
acquired.
✔✔Debt issuance costs are: - ✔✔Amortized over the term of the related debt liability
✔✔Scenario and Sensitivity Analysis - ✔✔
✔✔If you want to test how an increase in percentage of cost of good sold affects the
contribution margin, you would use ________. - ✔✔Sensitivity Analysis
✔✔When performing a scenario analysis, which of the following tools/functions in Excel
is used to create a dropdown list where we can select the live case? - ✔✔Data
Validation
✔✔You should perform sensitivity analysis when: - ✔✔You need to determine which
assumptions matter the most
✔✔The formula contained in the yellow highlighted cell (I39) is = ( , I9,I24). This formula
can be copied over to the entire live scenario section without any manual modification.
(Hint: do not forget to use absolute references.) - ✔✔Choose, $I$4
✔✔What is the share price when the discount rate is 13% and revenue growth is 15%?
- ✔✔36.70
✔✔What is the share price when COGS increases by 5%? - ✔✔29.29
,✔✔The formula contained in the YELLOW cell (G179) is ___________ Hint: do not
forget the $ when using absolute references. Use absolute reference so this formula
can be copied over to other cells in this section without any manual modification. -
✔✔=SMALL($F$177:$F$180,E179)
✔✔The formula contained in the ORANGE cell (H178) is = ($A$177:$G$180, (
,$F$177:$F$180,0),MATCH($A$177,$A$177: $F$177,0))
Hint: do not forget the $ when using absolute references. - ✔✔Index, match, A177
✔✔What type of chart did we use to build a tornado chart? - ✔✔Stacked bar chart
✔✔Assumption Drivers in order - ✔✔
✔✔Financial Analysis Fundamentals - ✔✔
✔✔Which of the following items are not included when determining income from
operations? - ✔✔Taxes
✔✔Which ratio would you use to determine the profitability of the goods sold by a
company? - ✔✔Gross Profit
✔✔When performing a vertical analysis which income statement item do you use to
determine the cost contribution for each expense category? (What is the denominator?)
- ✔✔Sales
✔✔Horizontal analysis allows us to analyze performance over: - ✔✔Time
✔✔When calculating the quick ratio or "acid test" which current asset or liability is
omitted? - ✔✔Inventory
✔✔For which organization would you expect to see the highest inventory turnover ratio?
- ✔✔Grocery Retailer
✔✔What actions could a company take to reduce its working capital funding gap? -
✔✔Tighten customer credit terms
✔✔The debt to equity ratio indicates: - ✔✔The proportion of the company financed by
lenders versus owners
✔✔Which of the following items are not included in working capital? - ✔✔Short Term
Investments
, ✔✔When calculating turnover of property plant & equipment and receivables, which
item from the income statement do we use? - ✔✔Sales
✔✔If a company wanted to finance the purchase of equipment without diluting
shareholders equity, which of the following operation could it consider? - ✔✔Obtaining a
loan from a bank
✔✔Working capital movement is included in which section of the cash flow statement? -
✔✔Operating Activities
✔✔The debt to tangible net worth ratio is calculated as follows: - ✔✔Interest Bearing
Liabilities / (Equity - Intangible Assets)
✔✔If the total assets to equity ratio of a company is increasing, it is possible that: -
✔✔The company is increasing the use of debt and getting higher financial leverage
✔✔Which ratio is not one of the three ratios that multiply together to produce the return
on equity ratio? - ✔✔Operating profit margin
✔✔Which financial leverage ratio is used with two other ratios to mathematically
produce the return on equity ratio? - ✔✔Total Assets / Equity
✔✔Which of the following is a tertiary ratio that drives profitability? - ✔✔SG&A Expense
/ Sales
✔✔Which ratios indicate how efficiently the company generates sales from its assets? -
✔✔Working capital turnover
✔✔The net profit margin ratio can mathematically be broken down as "Tax impact x
Capital structure impact x..." - ✔✔EBIT/Sales
✔✔Based on the following information from ABC Company's financial analysis, which
one of the following statements is NOT true? - ✔✔The company's ability to cover its
short-term obligations is getting higher over the five years.
✔✔Operational Modeling - ✔✔
✔✔What are financial modeling guidelines and why are they relevant? - ✔✔A set of
principles and guidance for financial modeling which promote consistency across
models used by all stakeholders.
✔✔Safety Pro-Tech Inc. produces protective equipment. The company's primary source
of revenue is from the sale of N95 masks. The industry has seen considerable growth
