Certified Financial Management
Specialist (CFMS 1) – Practice Test
Total Items: 50 | Type: 25 Multiple Choice + 25 True/False | Time: 45–60 minutes
Name: ______________________________________ Date: _______________
A. Multiple Choice (1–25)
Encircle the letter of the correct answer.
1. 1. What is the main goal of financial managers?
2. 2. Which market type involves a tangible location for securities trading?
3. 3. The OTC market is:
4. 4. A dealer market includes all of the following EXCEPT:
5. 5. Physical location stock exchanges:
6. 6. The comparables approach compares equity value to:
7. 7. Which method uses projected cash flows and NPV?
8. 8. Precedent transactions analysis depends on:
9. 9. Asset-based valuation focuses on:
10. 10. Book-value approach is best used for companies with:
11. 11. What does WACC stand for?
12. 12. Which is NOT included as investor-supplied capital?
13. 13. Optimal capital structure is one that:
14. 14. Brokers in a dealer market:
15. 15. In capital markets, 'capital' includes all EXCEPT:
16. 16. Tangible trading floors are a feature of:
17. 17. Capital structure refers to:
18. 18. Which method is least useful for firms with no comparable companies?
19. 19. The main assumption of fundamental valuation techniques is:
20. 20. A firm's capital excludes:
21. 21. Dealers in a market are responsible for:
22. 22. Over-the-Counter (OTC) refers to:
23. 23. WACC is minimized when:
24. 24. Discounted Cash Flow valuation is strongest when:
25. 25. The main function of stock markets is to:
B. True or False (26–50)
Write T if the statement is True, F if it is False.
26. 26. The OTC market operates without a physical trading floor.
27. 27. Physical exchanges rely heavily on electronic trading platforms only.
28. 28. Capital structure includes both long-term debt and equity.
29. 29. Brokers in a dealer market act as intermediaries.
30. 30. The comparables approach does not require peer company data.
31. 31. Discounted cash flow valuation ignores net present value.
32. 32. Asset-based valuation focuses on tangible assets and liabilities.
33. 33. Precedent transaction valuation is useful when similar deals exist.
34. 34. Book-value approach is ideal for high-growth tech firms.
35. 35. The goal of capital structure is to minimize WACC and maximize value.
36. 36. Accounts payable is considered part of investor-supplied capital.
37. 37. Common stock is a type of investor-supplied capital.
38. 38. The board of governors oversees physical exchanges.
39. 39. A dealer “makes a market” by holding an inventory of securities.
40. 40. Physical exchanges are examples of dealer markets.
41. 41. The comparables approach uses ratios and peer metrics.
42. 42. Capital can come from suppliers or taxing authorities.
43. 43. Broker-dealers exist only in the OTC market.
44. 44. Asset-based valuation is commonly used for going concerns.
45. 45. DCF works best with reliable future projections.
46. 46. A firm’s capital structure is always 50% debt and 50% equity.
47. 47. The stock market helps establish firm value through pricing.
48. 48. Precedent transactions valuation is based on current stock price.
49. 49. Equity valuation only considers past performance.
50. 50. Retained earnings are part of investor-supplied capital.
Answer Key
Multiple Choice
1. C
2. C
3. B
4. B
5. C
6. C
7. D
8. B
9. C
10. C
11. A
12. C
13. C
14. B
15. C
16. C
17. B
18. D
19. C
20. B
21. C
22. C
23. B
24. C
25. C
True or False
26. T
27. F
28. T
29. T
30. F
31. F
32. T
33. T
34. F
35. T
36. F
37. T
38. T
39. T
40. F
41. T
42. F
43. F
44. T
45. T
46. F
47. T
48. F
49. F
50. T
