What is the format of the CPA PEP Finance elective exam?

The Finance elective module final exam is 4 hours (240 minutes). It combines an objective-format portion (about 15 items) with two written cases. The two cases total about 200 minutes, and any single case runs between 80 and 120 minutes.

How many multiple-choice questions are on the CPA Finance elective?

CPA Canada does not publish a fixed multiple-choice count. The objective-format portion is roughly 15 items, around a quarter of the exam, with the remainder assessed through two integrated cases marked against CPA competencies.

What topics does the CPA Finance elective cover?

It develops depth in corporate finance: financial analysis and forecasting, capital budgeting, cost of capital and capital structure, business valuation, treasury and working-capital management, financial risk management, mergers and acquisitions, and financing decisions, integrated with management accounting.

What is the passing standard for the CPA Finance elective?

CPA Canada uses a competency-based standard set by the Board of Examiners rather than a fixed public raw percentage. Candidates must demonstrate the required level of competency across the assessed areas to pass the module.

Do I have to take the Finance elective?

No. CPA PEP candidates choose two of four electives: Finance, Assurance, Taxation, and Performance Management. Finance is recommended for those pursuing corporate finance, treasury, valuation, or advisory roles.

What are the prerequisites for the Finance elective?

Candidates must be admitted to CPA PEP and complete the two Core modules, Core 1 and Core 2, before attempting any elective. Electives build on the technical foundation established in the Core modules.

Is the CPA Finance elective case-based or multiple-choice?

It is partly both. About a quarter of the exam is objective-format questions, which are well suited to multiple-choice practice, while the majority is two integrated cases that require analysis, calculations, and supported recommendations.

How much does the CPA Finance elective cost?

Module tuition and examination fees are set and billed by each provincial or regional CPA body, such as CPA Western School of Business. There is no single national fee; check your regional CPA body's current fee schedule.

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A company can invest $10,000 today and receive $16,105 in 5 years. Using the rule that future value equals present value times (1 + r) to the power n, and given (1.10) to the 5th power equals approximately 1.6105, what annual compound return does this represent?

16%

10%

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Key Facts: CPA PEP Finance Elective Exam

4 hrs

Module Exam Length

CPA Canada Evaluation

2 cases

Plus Objective Portion

CPA Canada Blueprint

~15

Objective-Format Items

CPA Canada Blueprint

2 of 4

Electives Chosen

CPA PEP Electives

Core 1 & 2

Prerequisites

CPA Canada PEP

100

Free Practice Questions

OpenExamPrep

The CPA PEP Finance elective module final exam is a 4-hour computer-based assessment combining an objective-format portion (about 15 items, roughly a quarter of the exam) with two written cases totalling about 200 minutes, where each case runs 80 to 120 minutes. It is marked against CPA Canada Competency Map Finance competencies rather than a fixed raw passing percentage, and the Board of Examiners sets the standard. Candidates must complete Core 1 and Core 2 before electives, and choose two of four electives (Finance, Assurance, Taxation, Performance Management). Fees and rewrite rules are administered by each provincial or regional CPA body.

Sample CPA PEP Finance Elective Practice Questions

Try these sample questions to test your CPA PEP Finance Elective exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1A Canadian company reports current assets of $480,000 and current liabilities of $300,000, of which inventory is $150,000. What is the company's quick (acid-test) ratio?

A.1.10

B.1.60

C.0.50

D.2.40

Explanation: The quick ratio excludes inventory: (current assets minus inventory) divided by current liabilities = ($480,000 - $150,000) / $300,000 = $330,000 / $300,000 = 1.10. It measures liquidity using only the most readily convertible assets.

2Using the DuPont identity, a firm has a net profit margin of 8%, total asset turnover of 1.5, and an equity multiplier of 2.0. What is its return on equity (ROE)?

A.16%

B.24%

C.11%

D.12%

Explanation: The three-step DuPont decomposition computes ROE as net profit margin x asset turnover x equity multiplier = 0.08 x 1.5 x 2.0 = 0.24, or 24%. This isolates profitability, efficiency, and leverage drivers of return.

3A company forecasts sales growth of 20% using the percent-of-sales method. Sales rise from $1,000,000 to $1,200,000. Spontaneous assets are 60% of sales and spontaneous liabilities are 15% of sales. What is the additional funds needed (AFN) before considering retained earnings?

A.$45,000

B.$135,000

C.$90,000

D.$120,000

Explanation: AFN from the spontaneous relationship equals (asset ratio minus liability ratio) x change in sales = (0.60 - 0.15) x $200,000 = 0.45 x $200,000 = $90,000. This is the external financing gap before adding any retained earnings.

4Which financial ratio best measures a company's ability to meet its long-term interest obligations from operating earnings?

A.Gross profit margin

B.Current ratio

C.Inventory turnover

D.Times interest earned (interest coverage)

Explanation: Times interest earned (EBIT divided by interest expense) directly measures how many times operating earnings cover interest, indicating debt-servicing capacity. It is a core solvency ratio used in credit and financing analysis.

5A firm has a cash conversion cycle objective and reports: days inventory outstanding 60, days sales outstanding 45, and days payable outstanding 30. What is its cash conversion cycle (CCC)?

A.75 days

B.45 days

C.90 days

D.135 days

Explanation: CCC = DIO + DSO - DPO = 60 + 45 - 30 = 75 days. It measures the time between paying suppliers and collecting from customers, a key working-capital efficiency metric.

6When preparing a financial forecast for a CPA Finance engagement, why is sensitivity analysis on key assumptions considered best practice?

A.It guarantees the forecast will match actual results

B.It isolates how changes in critical drivers affect projected outcomes, supporting better recommendations

C.It eliminates the need to document assumptions

D.It converts the forecast to IFRS-compliant financial statements

Explanation: Sensitivity analysis varies one or more key assumptions (such as growth, margin, or discount rate) to show their impact on outcomes, helping decision-makers understand risk and the robustness of a recommendation. CPA candidates are expected to test reasonableness rather than rely on point estimates.

7A company's pro forma income statement shows projected EBIT of $500,000, interest of $80,000, and a 25% tax rate. What is projected net income?

A.$420,000

B.$300,000

C.$315,000

D.$375,000

Explanation: Earnings before tax = EBIT - interest = $500,000 - $80,000 = $420,000. Net income = $420,000 x (1 - 0.25) = $315,000. Interest is deducted before tax because it is tax-deductible.

8A sustainable growth rate is calculated as ROE x retention ratio. A firm has an ROE of 18% and pays out 40% of earnings as dividends. What is its sustainable growth rate?

A.18.0%

B.11.2%

C.7.2%

D.10.8%

Explanation: The retention ratio = 1 - payout ratio = 1 - 0.40 = 0.60. Sustainable growth = ROE x retention = 0.18 x 0.60 = 0.108, or 10.8%. This is the maximum growth achievable without external equity, holding leverage constant.

9Horizontal (trend) analysis of financial statements primarily involves:

A.Comparing line items across multiple periods to identify changes and trends

B.Benchmarking ratios against industry averages only

C.Restating statements from IFRS to ASPE

D.Expressing each line item as a percentage of total assets or sales in a single period

Explanation: Horizontal analysis compares financial statement line items across two or more periods, expressing changes in dollars or percentages to reveal growth or deterioration trends. It is distinct from vertical (common-size) analysis.

10A firm wants to improve its return on assets (ROA). Holding sales constant, which action would most directly increase ROA?

A.Issuing additional common shares

B.Reducing total assets by disposing of idle, non-productive assets

C.Increasing the dividend payout ratio

D.Refinancing short-term debt into long-term debt

Explanation: ROA = net income / total assets. Disposing of idle, non-productive assets reduces the denominator without reducing income, directly raising ROA. Efficient asset use is a core financial analysis lever.

About the CPA PEP Finance Elective Practice Questions

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