(2025/2026) CFI CBCA FINANCIAL
ANALYSIS FOR CREDIT EXAM
QUESTIONS AND DETAILED CORRECT
ANSWERS | A+ GRADE VERIFIED
ANSWERS
Vertical & Horizontal Analysis Correct Answer Financial
Analysis Overview
Financial analysis includes a number of steps to Correct
Answer get a complete picture of the performance of a
company. The starting point is the company's financial
statements.
Ratio analysis is great for Correct Answer understanding
the relationship between the income statement and the
balance sheet.
Performing Financial Analysis
Financial analysis must be undertaken with Correct
Answer an end-purpose in mind. This will influence how
you conduct and interpret your analysis.
Credit Analyst Correct 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
,Trend & Ratio Analysis Correct Answer Basic Ratio
Analysis
Adjusting Ratios for Distortion
Complex Adjustments
Financial analysis is frequently conducted within the
context of a specific borrowing request. Lenders must
Correct Answer overlay the proposed credit facilities and
loan terms on top of financial results to see how financial
metrics are impacted.
A credit professional may conduct the analysis using
Correct Answer actual current/historical results, as well as
using projected operating results.
There are two forms of financial analysis Correct Answer
Vertical Analysis and Horizontal Analysis
Vertical Analysis Correct 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
Horizontal Analysis Correct 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?
Analyzing credit means Correct Answer identifying risk to
repayment capacity. Falling behind industry trends can be
indicative of a company in decline
Ratio Analysis Correct Answer Performance Ratios
Financial Ratios
ANALYSIS FOR CREDIT EXAM
QUESTIONS AND DETAILED CORRECT
ANSWERS | A+ GRADE VERIFIED
ANSWERS
Vertical & Horizontal Analysis Correct Answer Financial
Analysis Overview
Financial analysis includes a number of steps to Correct
Answer get a complete picture of the performance of a
company. The starting point is the company's financial
statements.
Ratio analysis is great for Correct Answer understanding
the relationship between the income statement and the
balance sheet.
Performing Financial Analysis
Financial analysis must be undertaken with Correct
Answer an end-purpose in mind. This will influence how
you conduct and interpret your analysis.
Credit Analyst Correct 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
,Trend & Ratio Analysis Correct Answer Basic Ratio
Analysis
Adjusting Ratios for Distortion
Complex Adjustments
Financial analysis is frequently conducted within the
context of a specific borrowing request. Lenders must
Correct Answer overlay the proposed credit facilities and
loan terms on top of financial results to see how financial
metrics are impacted.
A credit professional may conduct the analysis using
Correct Answer actual current/historical results, as well as
using projected operating results.
There are two forms of financial analysis Correct Answer
Vertical Analysis and Horizontal Analysis
Vertical Analysis Correct 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
Horizontal Analysis Correct 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?
Analyzing credit means Correct Answer identifying risk to
repayment capacity. Falling behind industry trends can be
indicative of a company in decline
Ratio Analysis Correct Answer Performance Ratios
Financial Ratios
