CFI FMVA EXAM STUDY GUIDE 2026 TEST
PAPER QUESTIONS AND SOLUTIONS
◉ Performance Ratios. Answer: Return and Profitability Ratios
Asset Utilization Ratios
◉ Financial Leverage Ratios. Answer: Solvency & Liquidity Ratios
◉ Why Increase Debt rather than equity. Answer: 1. Retaining
Ownership Control
2. Cost of Capital
3. Flexibility
4. Timing & availability
5. Tax advantage
◉ Trend (Horizontal) Analysis. Answer: comparing results across
different periods
◉ Financial Model. Answer: Corporate Decisions, Project Finance,
Corporate Transactions, Investment Decisions
,◉ Complex Models. Answer: - High detail
- Precise
- Hard to Model
- prone to Error
◉ Simple Models. Answer: - Basic
- Easy to follow
- Lack of Precision
- Overly Simplified
◉ Top Down Analysis. Answer: Start with Total addressable Market and
work down from there based on MKT share and segments
◉ Bottom-Up Analysis. Answer: Start with basic drivers and build up to
revenue
◉ Regressions Analysis. Answer: analyze relationships between revenue
and other factors using the regressions in excel
◉ Year over year analysis. Answer: most basic form
,◉ Valuation. Answer: Attributing value to an asset, investment or
company
◉ Intrinsic Value - DCF. Answer: - Looking at company in isolation w/o
worrying about peers
- future performance
- does not depend on the mood of the market
◉ Relative Value. Answer: - Uses multiple to find the worth of company
- more likely to reflect mood of the mkt
Precedent transactions
- past mergers and acqusitions
- form of valuation includes a takeover premium
◉ Enterprise Value. Answer: Advantages
- More useful when comparing companies with different capital
structures
- Minimizes accounting policies relative to net income and earnings per
share
Disadvantages
- there are other debt and cash like items that may be difficult to measure
, - Less useful for analyzing stocks since enterprise value is total business
value and not equity value
◉ Equity Value. Answer: Advantages
- More Relevant to equity valuation which is just a portion of business
- requires less judgment than enterprise value where there is debate over
cash and debt
Disadvantages
- Multiples rely on accrual accounting which can be manipulated
- Different capital structures impact earnings even if the businesses are
otherwise identical
◉ UFCF. Answer: Cash flow that a business has before paying its debt
obligations
◉ Levered Free Cash Flows. Answer: Cash flow after is has met its debt
obligations
◉ Things that affect Beta. Answer: - Interest Rate
- Business/Economic Cycle
- Inflation
- Political/ legislation
PAPER QUESTIONS AND SOLUTIONS
◉ Performance Ratios. Answer: Return and Profitability Ratios
Asset Utilization Ratios
◉ Financial Leverage Ratios. Answer: Solvency & Liquidity Ratios
◉ Why Increase Debt rather than equity. Answer: 1. Retaining
Ownership Control
2. Cost of Capital
3. Flexibility
4. Timing & availability
5. Tax advantage
◉ Trend (Horizontal) Analysis. Answer: comparing results across
different periods
◉ Financial Model. Answer: Corporate Decisions, Project Finance,
Corporate Transactions, Investment Decisions
,◉ Complex Models. Answer: - High detail
- Precise
- Hard to Model
- prone to Error
◉ Simple Models. Answer: - Basic
- Easy to follow
- Lack of Precision
- Overly Simplified
◉ Top Down Analysis. Answer: Start with Total addressable Market and
work down from there based on MKT share and segments
◉ Bottom-Up Analysis. Answer: Start with basic drivers and build up to
revenue
◉ Regressions Analysis. Answer: analyze relationships between revenue
and other factors using the regressions in excel
◉ Year over year analysis. Answer: most basic form
,◉ Valuation. Answer: Attributing value to an asset, investment or
company
◉ Intrinsic Value - DCF. Answer: - Looking at company in isolation w/o
worrying about peers
- future performance
- does not depend on the mood of the market
◉ Relative Value. Answer: - Uses multiple to find the worth of company
- more likely to reflect mood of the mkt
Precedent transactions
- past mergers and acqusitions
- form of valuation includes a takeover premium
◉ Enterprise Value. Answer: Advantages
- More useful when comparing companies with different capital
structures
- Minimizes accounting policies relative to net income and earnings per
share
Disadvantages
- there are other debt and cash like items that may be difficult to measure
, - Less useful for analyzing stocks since enterprise value is total business
value and not equity value
◉ Equity Value. Answer: Advantages
- More Relevant to equity valuation which is just a portion of business
- requires less judgment than enterprise value where there is debate over
cash and debt
Disadvantages
- Multiples rely on accrual accounting which can be manipulated
- Different capital structures impact earnings even if the businesses are
otherwise identical
◉ UFCF. Answer: Cash flow that a business has before paying its debt
obligations
◉ Levered Free Cash Flows. Answer: Cash flow after is has met its debt
obligations
◉ Things that affect Beta. Answer: - Interest Rate
- Business/Economic Cycle
- Inflation
- Political/ legislation
