Examius
🇵🇰 ICAP CAF · flashcards
ICAP CAF CAF-7: Business Insights and Analysis Flashcards
60 question-and-answer cards covering CAF-7: Business Insights and Analysis as it is examined in ICAP CAF. 24 of them are printed below, taken from across the deck — no signup, no paywall on the preview.
24 sample cards from the CAF-7: Business Insights and Analysis deck
Sampled from the end of the deck, so these are different cards from the ones shown on the syllabus page.
Distinguish systematic risk from unsystematic risk.
Systematic (market) risk affects all firms and cannot be diversified away; unsystematic (specific) risk is company-specific and can be eliminated through diversification.
Name four common financial risk management techniques used to deal with risk.
Risk avoidance, risk reduction (mitigation), risk transfer (e.g. insurance/hedging), and risk retention (acceptance).
What is hedging in financial risk management?
Taking an offsetting position (e.g. via forwards, futures, options or swaps) to reduce or eliminate exposure to adverse movements in interest rates, exchange rates or prices.
Name three instruments used to hedge interest rate risk.
Forward Rate Agreements (FRAs), interest rate futures, interest rate options/caps/floors, and interest rate swaps.
What is an interest rate swap?
An agreement between two parties to exchange interest payment streams (typically fixed-for-floating) on a notional principal, used to manage interest rate exposure.
What is a Forward Rate Agreement (FRA)?
An over-the-counter contract that fixes an interest rate on a notional loan/deposit for a future period, with cash settlement of the difference against the actual rate.
Name four internal techniques for managing foreign exchange (transaction) risk.
Invoicing in home currency, matching receipts and payments, leading and lagging, and netting of intra-group balances.
Name three external instruments used to hedge foreign exchange risk.
Forward exchange contracts, currency futures, currency options, and currency swaps; money market hedges are also used.
How does a forward exchange contract hedge currency risk?
It locks in a fixed exchange rate today for a currency transaction settling on a future date, removing uncertainty over the future spot rate.
What is the purpose of ISO 31000?
It provides principles, a framework and a process for managing risk in any organization — guidelines (not a certifiable standard) to make risk management effective and integrated.
List the main steps of the ISO 31000 risk management PROCESS.
Establish scope/context/criteria; risk assessment (risk identification, risk analysis, risk evaluation); risk treatment; plus ongoing communication & consultation, monitoring & review, and recording & reporting.
What are the three components of 'risk assessment' under ISO 31000?
Risk identification, risk analysis, and risk evaluation.
Name three quantitative techniques used in budget preparation.
Time series analysis (trend and seasonal variations), regression/line of best fit, high-low method, learning curves, and index numbers.
In time-series analysis, what does the ADDITIVE model state? (Y = ?)
Y = T + S + C + R (Actual = Trend + Seasonal + Cyclical + Random variation); the multiplicative model is Y = T x S x C x R.
What is the high-low method used for in budgeting?
To separate a semi-variable cost into fixed and variable elements: variable cost per unit = (cost at high activity - cost at low activity) / (high units - low units).
What is working capital and how is it calculated?
Working capital = current assets - current liabilities; it represents the funds available to finance day-to-day operations.
State the formula for the cash operating cycle (working capital cycle).
Inventory days + receivables (debtor) days - payables (creditor) days = the time between paying for inputs and collecting cash from customers.
What does the Economic Order Quantity (EOQ) model determine, and what is its formula?
The order quantity that minimizes total inventory ordering and holding costs: EOQ = √(2 x Co x D / Ch), where Co = cost per order, D = annual demand, Ch = holding cost per unit per year.
Distinguish an aggressive from a conservative working capital financing policy.
An aggressive policy finances more current assets with short-term (cheaper, riskier) finance, raising return and liquidity risk; a conservative policy uses more long-term finance, lowering risk but also return.
What is the Net Present Value (NPV) investment appraisal method, and its decision rule?
NPV discounts all future cash flows to present value at the cost of capital and subtracts the initial outlay; accept the project if NPV is positive (it adds value).
What is the Internal Rate of Return (IRR)?
The discount rate at which a project's NPV equals zero; accept the project if IRR exceeds the company's cost of capital.
State the formula used to estimate IRR by interpolation between two rates.
IRR ≈ L + [NPV_L / (NPV_L - NPV_H)] x (H - L), where L and H are the lower and higher discount rates and NPV_L, NPV_H the corresponding NPVs.
What is the payback period method and its main weakness?
It measures the time taken for a project's cash inflows to recover the initial investment; its main weakness is that it ignores the time value of money and cash flows after the payback point.
What is the Accounting Rate of Return (ARR), and how is it calculated?
ARR = (average annual accounting profit / average (or initial) investment) x 100%; the project is accepted if ARR exceeds a target rate.
What this deck covers
The CAF-7: Business Insights and Analysis deck follows the ICAP CAF CAF-7: Business Insights and Analysis syllabus — 7 chapters and 21 topics — so questions land on material that is genuinely examinable rather than trivia around it. That works out to roughly 8.6 cards per chapter.
Answers are written to be recallable, not just readable — averaging about 149 characters, which is long enough to carry the reasoning and short enough to say out loud.
A deck like this earns its keep on the second and third pass. Read the syllabus first so you know the shape of the subject, then use the cards to find the specific facts that have not stuck.
CAF-7: Business Insights and Analysis flashcards FAQ
How many CAF-7: Business Insights and Analysis flashcards are in this ICAP CAF deck?
60 cards. This page previews 24 of them, sampled evenly across the deck so you can judge the difficulty before installing anything.
Are these ICAP CAF flashcards free?
Yes. The preview here is free to read with no signup, and the full 60-card deck is free inside the Examius app.
What do the CAF-7: Business Insights and Analysis cards cover?
They follow the ICAP CAF CAF-7: Business Insights and Analysis syllabus — 7 chapters and 21 topics — so the questions track what is actually examinable.
How should I use these flashcards?
Read the syllabus first so you know the shape of the subject, then drill the deck. Examius schedules each card with spaced repetition, so cards you keep missing come back sooner and ones you know drift further apart.