Building Financial Models for Entrepreneurs certification exam assessment practice question and answer (Q&A) dump including multiple choice questions (MCQ) and objective type questions, with detail explanation and reference available free, helpful to pass the Building Financial Models for Entrepreneurs exam and earn Building Financial Models for Entrepreneurs certificate.
Table of Contents
Question 1
What does the funding gap represent in a financial model?
A. The amount of capital needed to cover projected deficits and reach break-even
B. The difference between fixed and variable costs
C. The total cost of launching a new product
Answer
A. The amount of capital needed to cover projected deficits and reach break-even
Explanation
It’s the sum of deficits after accounting for available cash.
Question 2
What is the purpose of the Summary tab in the financial model?
A. To show investors that your projections are grounded in reality
B. To avoid creating a balance sheet
C. To manually enter your funding gap and net income
Answer
A. To show investors that your projections are grounded in reality
Explanation
Clear assumptions demonstrate thoughtful planning and credibility.
Question 3
Why is it important to justify the assumptions in your financial model?
A. To show your funding gap and key financial metrics based on your projections
B. To track investor communications
C. To reduce the need for external audits
Answer
A. To show your funding gap and key financial metrics based on your projections
Explanation
It summarizes outputs like funding gap, net income, and breakeven timing.
Question 4
Why is it important to capture assumptions behind revenue projections?
A. To reduce the number of tabs in your model
B. To avoid entering historical data
C. To help investors understand the logic behind your financial estimates
Answer
C. To help investors understand the logic behind your financial estimates
Explanation
Clear assumptions build investor confidence and support negotiation.
Question 5
What does a declining net income over time indicate in your financial model?
A. That you should increase capital expenditures
B. That your revenue and cost assumptions may need to be revised
C. That your business is ready for acquisition
Answer
B. That your revenue and cost assumptions may need to be revised
Explanation
A declining net income signals a need to revisit projections.
Question 6
What is the benefit of using volume-based projections for revenue and costs?
A. They automatically calculate your funding gap
B. They allow you to model revenue and costs based on units sold and price per unit
C. They eliminate the need for assumptions
Answer
B. They allow you to model revenue and costs based on units sold and price per unit
Explanation
This method helps tie financials directly to business activity.
Question 7
Why should entrepreneurs include capital expenditures in their financial model?
A. To account for large, growth-related investments like equipment or vehicles
B. To calculate their tax rate
C. To reduce their operating expenses
Answer
A. To account for large, growth-related investments like equipment or vehicles
Explanation
Capex reflects major investments needed to scale operations.
Question 8
Why is it important to test different growth scenarios in your financial model?
A. To prepare for investor questions about risk and strategy
B. To eliminate the need for assumptions
C. To reduce the number of revenue lines
Answer
A. To prepare for investor questions about risk and strategy
Explanation
Scenario planning helps you respond confidently to investor concerns.
Question 9
What does the “burn rate” refer to in financial modeling?
A. The rate at which capital expenditures increase
B. The amount of cash a business spends each month or year to operate
C. The percentage of equity sold to investors
Answer
B. The amount of cash a business spends each month or year to operate
Explanation
It’s a key metric for understanding sustainability.
Question 10
What is the lasting value of using the integrated financial model provided in the course?
A. It helps entrepreneurs understand the relationships between inputs, metrics, and capital
B. It eliminates the need for deep customization
C. It guarantees investor funding
Answer
A. It helps entrepreneurs understand the relationships between inputs, metrics, and capital
Explanation
The model builds foundational understanding for strategic planning, no matter what model you end up using.