CFI CBCA Financial Analysis for Credit | Questions with 100%
Verified Answers | 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
Question: Sales Revenue
Answer: is the lifeblood of the income statement and is used in several of the ratios seen throughout the
module.
Question: Cost of Good Sold
Answer: relates to direct labor and raw materials needed to create the product or service that is being sold, as
well as depreciation on manufacturing equipment used in production.
Verified Answers | 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
Question: Sales Revenue
Answer: is the lifeblood of the income statement and is used in several of the ratios seen throughout the
module.
Question: Cost of Good Sold
Answer: relates to direct labor and raw materials needed to create the product or service that is being sold, as
well as depreciation on manufacturing equipment used in production.
