Level 3 exam — Finance & Accounting

Exam — fresh questions

12 fresh questions to validate financial analysis: SIG, ratios, WCR and cash, break-even point and forecast.
Answer everything, then click Check: your score and explanations will appear.

3.1 · Recall

1. What are the intermediate management balances (SIG) for?

Paying VAT and sorting the month's invoices Breaking down the formation of the result into successive steps Preparing the balance sheet and counting stock Calculating wages and payroll charges

Margin, value added, EBITDA: the SIG show where performance builds, level by level.

3.1 · Application

2. Rachid has good value added but weak EBITDA. What to conclude first?

VAT explains the gap: wait for the return Depreciation is high: review the investment policy Staff costs absorb the wealth created Turnover is nil: start everything over

Between value added and EBITDA sit staff costs: that is where wealth disappears.

3.2 · Application

3. Rachid reads “200,000 of debt”. How to interpret it well?

Ignore it: debt only concerns the banker Relate it to equity and compare with the sector and last year Always maximise it: stack debt with no limit or comparison Isolate it: conclude on the gross amount with no reference

An isolated figure says nothing: related, compared (sector, benchmark, trend) and cross-checked, it becomes a diagnosis.

3.2 · Decision

4. One flattering isolated ratio, but a deteriorating set (falling liquidity, rising debt). You decide…

Stack twenty more ratios to drown the signal Conclude by feeling, with no benchmark or comparison All is well: the flattering ratio reassures durably Alert: the deteriorating set beats the flattering isolated ratio

Decision: never judge on one isolated ratio — the set and the trend tell the truth.

3.3 · Recall

5. How do you calculate the WCR (basic formula)?

Inventories + trade receivables − trade payables Total assets minus total liabilities Working capital plus available cash Revenues minus expenses of the year

The WCR is the money tied up by operations; and Cash = working capital − WCR.

3.3 · Application

6. Rachid is profitable but his account is dry in full growth. Why?

Because growth removes any need for outside financing Because profit is locked by law, formally forbidden to use Because the WCR exploded: stock and receivables to finance, charges paid in cash Because he sells too little: just double every displayed price

Result ≠ cash: “bankruptcy through growth” — the WCR devours the cash of profits.

3.3 · Decision

7. Dilemma — A big order would lift sales but explode the WCR (stock to finance, 90-day payment). You…

Refuse all growth: never sell on credit to anyone again Negotiate a deposit and shorter terms, or spread the order to hold the WCR Increase dormant stock to impress the customer Sign unconditionally: turnover justifies everything, cash will follow

Decision: accept growth while financing its WCR (deposit, terms, spreading) — neither timid refusal nor headlong rush.

3.4 · Application

8. Fixed costs 100,000 and contribution margin ratio 40%. What is the break-even?

140,000: fixed plus the ratio added 40,000: fixed costs minus the margin ratio 250,000 of turnover: 100,000 / 0.40, nil result 100,000 of profit: fixed costs become gain

Break-even = fixed costs / contribution margin ratio; below you lose, above you earn.

3.4 · Decision

9. Dilemma — To lower his break-even, Rachid hesitates: outsource (variable) or buy a machine (fixed up)?

Ignore break-even: decide purely by feeling, pricing nothing Invest with no calculation: a modern machine impresses customers and settles it Outsource with no calculation: variable cost is always best everywhere Compare both break-evens and the safety margin: invest only if sales durably hold the new bar

Decision: high fixed costs raise break-even and fragilise downturns — investing is wise only if volume durably follows.

3.5 · Application

10. Rachid's plan forecasts a negative March balance. What to do from February?

Fill in time: short-term credit, negotiated deferral or planned input Delete the plan: a table changes nothing real Confuse cash and result: profit will suffice Wait for the overdraft: the banker will understand urgently

Anticipating means dealing before maturity: a forecast hole is financed in time, never after.

3.5 · Decision

11. Dilemma — Rachid's forecast is profitable but the cash plan shows a March hole. Facing the banker, you…

Hide the cash plan: a banker only cares about profits Drop the whole project: any cash hole would prove total failure Show only the forecast result: March cash will sort itself out Show both: project profitability + one-off hole financed in time (short-term credit)

Decision: the result proves viability, the plan proves lucidity — a one-off need financed in time reassures; hidden, it worries.

3.5 · Application

12. Rachid's forecast will inevitably diverge from reality. Why keep it anyway?

Because it forces anticipation, scenario testing and planned-vs-actual comparison Because it is mandatory for every existing business Because it predicts the future to the cent, always and in all cases Because it replaces all accounting and removes any real tracking

A forecast is a reasoning and anticipation tool: better an imperfect map than sailing blind.

What's next?

Score ≥ 80%: move to Level 4 — V3 (costs and cost accounting, budget, KPI and dashboards, investment, Excel).
Score < 80%: re-read the explanations above — each re-explains the concept — then redo the 48h challenges of the 5 sections.