FINANCIAL MODELING MAIN EXAM TEST 2025/2026
QUESTIONS WITH ANSWERS GRADED A+
✔✔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
over the past two years, and this has been reflected in the company's financial
performance. However, competition in this market has increased and the product is now
considered to be a commodity with relatively low barriers to entry.
You have been engaged to help the company forecast its revenue and plan for future
growth. Management has asked for your preliminary thoughts on their internally
prepared schedule which can be downloaded.
What does the observed level of operational efficiency indicate? - ✔✔The company
should consider additional capital expenditure to increase the capacity of the plant.
✔✔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
over the past two years, and this has been reflected in the company's financial
performance. However, competition in this market has increased and the product is now
considered to be a commodity with relatively low barriers to entry.
You have been engaged to help the company forecast its revenue and plan for future
growth. Management has asked for your preliminary thoughts on their internally
prepared schedule which can be downloaded.
Is the pricing forecast realistic? - ✔✔No. The degree of pricing power is not realistic as
increased competition has entered the market.
✔✔The only variable cost for your client's business is materials. Calculate the average
sales volume over the three-year historical period provided. - ✔✔2.5 million units.
✔✔For 2022, your client is expecting a sales volume of 4.5 million units and an inflation
rate of 4.0%. Calculate the total variable costs in US dollars for 2022. - ✔✔$29.0 million.
✔✔In terms of gross-profit, which of the following periods likely requires further
investigation or analysis? - ✔✔Fiscal 2016: Margins appear to be lower than expected.
✔✔Consider EBITDA as a percentage of Revenue. What is a possible reason for the
observed EBITDA-margin in fiscal 2015? - ✔✔An increase in sales commissions to
boost sales volumes.
✔✔What is the cost of goods sold primarily driven by for a given period? - ✔✔Sales
Volume
, ✔✔Why would an increase in the company's days in A/P produce cash for a business? -
✔✔The company is 'stretching its payables' and deferring a cash outflow.
✔✔Why would an increase in a businesses' days in inventory consume cash? - ✔✔The
business is expending cash to build up its inventory levels
✔✔What is the Q2 2022 quarterly revenue amount implied by the accounts receivable
balance and days in A/R? - ✔✔$26.8 million.
✔✔What is the Q3 2021 quarterly COGS amount implied by the inventory? - ✔✔$12.1
million.
✔✔A real-estate holdings company has the following fixed asset detail:Buildings: $25.0
Million; Useful Life 20-years.Land: $5.0 Million.Assuming straight-line depreciation, what
would the company's total annual depreciation expense be? - ✔✔$1.25 million.
✔✔Having a very successful year, the real-estate holdings company manages to
acquire a new property on July 1, 2021. The company has a fiscal year-end of July 31.
The details on the building and land for the new property are as follows:BuildingCost
basis - $40.0 million.Useful life - 30 years.LandCost basis - $10.0 million.What would
the accounting depreciation expense be for the fiscal year ended July 31, 2021? -
✔✔$111 thousand.
✔✔Recall from the last question that the real-estate holdings company acquired a new
property on July 1, 2021. The company has a fiscal year-end of July 31. The details on
the building and land for the new property are as follows:BuildingCost basis - $40.0
million.Useful life - 30 years.LandCost basis - $10.0 million.What would the accounting
depreciation expense be for the fiscal year ended July 31, 2022? - ✔✔$1.33 million.
✔✔In the below corkscrew, what would be the most optimal formula in cell G8? -
✔✔=SUM(G5:G7)
✔✔Which of the following is critical to understand when putting together an asset
schedule to track the company's tax basis? - ✔✔The subject company's relevant tax
authority and its rules for depreciation.
✔✔Why is it important to track a pool of tax losses in a financial model? - ✔✔The losses
can be applied to future taxable income and reduce taxes payable.
✔✔Which of the following statements regarding model review is true? - ✔✔Using
keyboard shortcuts can greatly expedite a model review.
QUESTIONS WITH ANSWERS GRADED A+
✔✔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
over the past two years, and this has been reflected in the company's financial
performance. However, competition in this market has increased and the product is now
considered to be a commodity with relatively low barriers to entry.
You have been engaged to help the company forecast its revenue and plan for future
growth. Management has asked for your preliminary thoughts on their internally
prepared schedule which can be downloaded.
What does the observed level of operational efficiency indicate? - ✔✔The company
should consider additional capital expenditure to increase the capacity of the plant.
✔✔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
over the past two years, and this has been reflected in the company's financial
performance. However, competition in this market has increased and the product is now
considered to be a commodity with relatively low barriers to entry.
You have been engaged to help the company forecast its revenue and plan for future
growth. Management has asked for your preliminary thoughts on their internally
prepared schedule which can be downloaded.
Is the pricing forecast realistic? - ✔✔No. The degree of pricing power is not realistic as
increased competition has entered the market.
✔✔The only variable cost for your client's business is materials. Calculate the average
sales volume over the three-year historical period provided. - ✔✔2.5 million units.
✔✔For 2022, your client is expecting a sales volume of 4.5 million units and an inflation
rate of 4.0%. Calculate the total variable costs in US dollars for 2022. - ✔✔$29.0 million.
✔✔In terms of gross-profit, which of the following periods likely requires further
investigation or analysis? - ✔✔Fiscal 2016: Margins appear to be lower than expected.
✔✔Consider EBITDA as a percentage of Revenue. What is a possible reason for the
observed EBITDA-margin in fiscal 2015? - ✔✔An increase in sales commissions to
boost sales volumes.
✔✔What is the cost of goods sold primarily driven by for a given period? - ✔✔Sales
Volume
, ✔✔Why would an increase in the company's days in A/P produce cash for a business? -
✔✔The company is 'stretching its payables' and deferring a cash outflow.
✔✔Why would an increase in a businesses' days in inventory consume cash? - ✔✔The
business is expending cash to build up its inventory levels
✔✔What is the Q2 2022 quarterly revenue amount implied by the accounts receivable
balance and days in A/R? - ✔✔$26.8 million.
✔✔What is the Q3 2021 quarterly COGS amount implied by the inventory? - ✔✔$12.1
million.
✔✔A real-estate holdings company has the following fixed asset detail:Buildings: $25.0
Million; Useful Life 20-years.Land: $5.0 Million.Assuming straight-line depreciation, what
would the company's total annual depreciation expense be? - ✔✔$1.25 million.
✔✔Having a very successful year, the real-estate holdings company manages to
acquire a new property on July 1, 2021. The company has a fiscal year-end of July 31.
The details on the building and land for the new property are as follows:BuildingCost
basis - $40.0 million.Useful life - 30 years.LandCost basis - $10.0 million.What would
the accounting depreciation expense be for the fiscal year ended July 31, 2021? -
✔✔$111 thousand.
✔✔Recall from the last question that the real-estate holdings company acquired a new
property on July 1, 2021. The company has a fiscal year-end of July 31. The details on
the building and land for the new property are as follows:BuildingCost basis - $40.0
million.Useful life - 30 years.LandCost basis - $10.0 million.What would the accounting
depreciation expense be for the fiscal year ended July 31, 2022? - ✔✔$1.33 million.
✔✔In the below corkscrew, what would be the most optimal formula in cell G8? -
✔✔=SUM(G5:G7)
✔✔Which of the following is critical to understand when putting together an asset
schedule to track the company's tax basis? - ✔✔The subject company's relevant tax
authority and its rules for depreciation.
✔✔Why is it important to track a pool of tax losses in a financial model? - ✔✔The losses
can be applied to future taxable income and reduce taxes payable.
✔✔Which of the following statements regarding model review is true? - ✔✔Using
keyboard shortcuts can greatly expedite a model review.
