FPAC Part I cheat sheet

Gross profit margin = (Revenue − Cost of goods sold) / Revenue; measures profitability before operating overhead.

Current ratio = Current assets / Current liabilities; a value below 1.0 signals working capital deficiency.

Quick (acid-test) ratio = (Cash + Marketable securities + Receivables) / Current liabilities; excludes inventory and prepaids.

Return on equity (DuPont) = Net profit margin × Asset turnover × Equity multiplier; decomposes ROE into profitability, efficiency, and leverage.

Free cash flow = Operating cash flow − Capital expenditures; the cash available after maintaining and expanding the asset base.

NPV decision rule: accept a project when NPV > 0 using the cost of capital as the discount rate; IRR rule accepts when IRR > hurdle rate.

Break-even units = Fixed costs / (Unit price − Unit variable cost); the denominator is the contribution margin per unit.

Times interest earned = EBIT / Interest expense; a lower ratio indicates weaker capacity to service debt from operations.

Cash conversion cycle = Days inventory outstanding + Days sales outstanding − Days payables outstanding; a shorter cycle frees working capital.

Data quality dimensions include accuracy, completeness, timeliness, consistency, and validity; each must be assessed before analytical use.

ETL extracts from source systems, transforms to conformed standards, and loads to a target store; ELT loads first and transforms in the warehouse.

A data warehouse stores structured, historized data for reporting; a data lake stores raw structured and unstructured data at scale.

Relational integrity: primary keys uniquely identify rows; foreign keys enforce referential integrity between tables.

SQL joins: INNER returns matching rows only; LEFT returns all left-table rows with nulls where no match exists.

Normalization (1NF–3NF) reduces redundancy; denormalization trades storage for faster read queries in analytical models.

Access controls use role-based or attribute-based authorization; segregation of duties prevents a single user from both creating and approving changes.

A system of record is the authoritative source for a data element; conflicting copies elsewhere are reconciled to it.

Vertical analysis expresses each line as a percentage of a base (revenue on the income statement, total assets on the balance sheet).

Horizontal analysis computes period-over-period percentage change: (Current − Prior) / Prior.

Variance analysis decomposes budget-to-actual gaps into price/rate and volume/efficiency components.

Debt-to-equity = Total liabilities / Total shareholders' equity; a leverage measure used in solvency assessment.

Inventory turnover = Cost of goods sold / Average inventory; days inventory = 365 / turnover.

Payback period is the time to recover the initial investment from cumulative cash inflows; it ignores cash flows after payback.

Sensitivity analysis varies one input at a time; scenario analysis varies multiple inputs together to model coherent outcomes.

Contribution margin ratio = (Revenue − Variable costs) / Revenue; applied to forecast profit at different volume levels.

A KPI is a quantifiable measure tied to a strategic objective; it must have a defined formula, owner, and refresh cadence.

Reconciliation controls compare two independent data sets and flag differences above a defined tolerance for investigation.

Audit trails log who changed what, when, and from where; immutable logs support forensic reconstruction.

Data lineage traces a data element from origin through transformations to report, supporting impact analysis and audit.

A dashboard should map each visual to a decision; vanity metrics without an action linkage are excluded.

Master data management governs shared reference entities (customer, vendor, account) so systems use consistent identifiers.

Backup and recovery: RPO defines tolerable data loss; RTO defines tolerable downtime; both drive recovery design.

Predictive models require out-of-sample validation; in-sample fit overstates accuracy and signals overfitting.

Working capital = Current assets − Current liabilities; a positive balance supports short-term operating obligations.

Operating margin = Operating income / Revenue; excludes non-operating items such as interest and one-time gains.

Economic value added (EVA) = NOPAT − (Invested capital × Cost of capital); positive EVA indicates value creation above the capital charge.

Weighted average cost of capital = (E/V × Re) + (D/V × Rd × (1 − tax rate)); the blended required return on capital.

Capital budgeting ranks mutually exclusive projects by NPV, not IRR, when the two conflict due to scale or timing.

Depreciation methods: straight-line allocates evenly; accelerated methods front-load expense and lower early taxable income.

Liquidity vs. solvency: liquidity covers obligations due within a year; solvency addresses long-term debt-service capacity.

Common-size cash flow analysis expresses operating, investing, and financing flows as a percentage of revenue.

Spreadsheet model controls: separate inputs, calculations, and outputs; hard-coded values inside formulas are a control weakness.

Version control for models records changes with author, date, and rationale so prior states can be restored and audited.

A data dictionary documents field names, types, allowed values, and owners for each element in a dataset.

Automated validation rules (range checks, format checks, referential checks) catch errors at the point of data entry.

Sampling risk: statistical sampling supports quantified confidence; judgmental sampling does not support projection to the population.

Cloud shared-responsibility model: the provider secures infrastructure; the customer secures data, access, and configuration.

Encryption at rest protects stored data; encryption in transit (TLS) protects data moving between systems.

Robotic process automation executes rule-based, repetitive tasks deterministically; it does not infer or handle unstructured judgment.

Revenue recognition: recognize when control of the good or service transfers to the customer, in the amount of consideration expected.

Accrual accounting matches expenses to the periods they help generate revenue, independent of cash timing.

Ratio benchmarking compares a firm to industry peers or its own history; a single-period ratio in isolation is not diagnostic.

DuPont three-step: ROE = Net income/Sales × Sales/Assets × Assets/Equity.

Interest coverage and leverage ratios together indicate default risk better than either alone.

Cash flow from operations adjusted for non-cash items (depreciation, amortization) is the starting bridge from net income.

A deferred revenue liability arises when cash is received before the performance obligation is satisfied.

Data governance assigns ownership (accountable), stewardship (operational), and custody (technical) roles for data assets.

A data classification scheme (public, internal, confidential, restricted) drives handling and access requirements.

Real-time vs. batch: streaming pipelines process events continuously; batch pipelines process scheduled chunks with higher latency.

A single source of truth requires one authoritative system per data domain; multiple masters create reconciliation cost.

Data retention schedules define minimum and maximum retention; legal holds suspend deletion obligations.

Anomaly detection flags values outside expected ranges or patterns; thresholds must be tuned to limit false positives.

API integration returns structured payloads (e.g., JSON) and should enforce authentication, rate limits, and schema validation.

Model risk management requires documentation, independent validation, and periodic monitoring of models used in decisions.