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Free Cambridge English Financial (ICFE) Exam Questions and Answers
Last updated: March 29, 2025
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Cambridge English Financial
(ICFE)
#Question
A company is evaluating a project with a payback period of three years. What does this mean?
A.
The project has low risk
B.
The project will generate high returns immediately
C.
The project will recover its initial investment in three years
D.
The project will not be profitable
Correct Answer:
C
A payback period of three years indicates that the project is expected to recover its initial investment within that time frame.
#Question
What does the term 'shareholder equity' represent?
A.
The total assets of the company
B.
The net assets owned by shareholders
C.
The total liabilities of the company
D.
The total revenue of the company
Correct Answer:
B
Shareholder equity represents the net assets of a company that belong to the shareholders after liabilities are deducted from assets.
#Question
A financial consultant recommends diversifying investments. What is the main goal of this strategy?
A.
To increase short-term profits
B.
To focus on high-risk investments
C.
To reduce risk
D.
To maximize operational efficiency
Correct Answer:
C
Diversification aims to reduce risk by spreading investments across various asset classes, minimizing the impact of any single investment's poor performance.
#Question
If a company has a large amount of cash reserves, what is one potential risk?
A.
Higher operational risk
B.
Low liquidity
C.
Opportunity cost of not investing
D.
Increased debt levels
Correct Answer:
C
Holding large cash reserves can lead to opportunity costs as funds that could be invested for growth remain idle.
#Question
A company wants to assess the performance of its investment strategy. Which metric would be most relevant?
A.
Current Ratio
B.
Gross Profit Margin
C.
Return on Investment (ROI)
D.
Quick Ratio
Correct Answer:
C
Return on Investment (ROI) measures the effectiveness of an investment strategy by comparing the return to the cost of the investment.
#Question
What does the term 'operational risk' refer to?
A.
The risk of default on loans
B.
The risk related to competition
C.
The risk arising from a company's internal processes, systems, and people
D.
The risk of financial loss due to market fluctuations
Correct Answer:
C
Operational risk is the risk of loss resulting from inadequate or failed internal processes, people, and systems.
#Question
If a business wants to improve its profitability, which area should it focus on?
A.
Increasing sales revenue
B.
Reducing market share
C.
Reducing operational efficiency
D.
Raising employee salaries
Correct Answer:
A
Increasing sales revenue is a direct way to improve profitability, alongside managing costs effectively.
Cambridge English Financial (ICFE)
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