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Exam Review

Key Facts: IFoA CB1 Exam

3h20m

Exam Duration

IFoA curriculum

4

Syllabus Areas

IFoA CB1 syllabus

35%

Largest Area (Financing)

IFoA CB1 syllabus

150 hrs

Recommended Study

IFoA curriculum

30/50/20

Knowledge/Application/Higher

IFoA CB1 syllabus

100

Practice Questions

OpenExamPrep

CB1 Business Finance is one of the IFoA Core Business (Core Principles) subjects on the associate pathway, assessed by a single 3-hour-20-minute computer-based written exam combining a written Paper A and a problem-based Paper B. The 2026 syllabus weights the four areas as Corporate governance and organisation 18%, How corporates are financed 35%, Evaluating projects 15%, and Constructing and interpreting company accounts 32%, with roughly 30% of marks for knowledge, 50% for application and 20% for higher-order skills. The IFoA does not publish a fixed question count or pass mark, and recommends around 150 study hours. The real exam uses structured written answers; this free bank provides 100 MCQs as knowledge prep across the testable body of corporate-finance and accounting material.

Sample IFoA CB1 Practice Questions

Try these sample questions to review concepts for the IFoA CB1 exam. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1Under the agency theory of the firm, an 'agency cost' most directly arises because:
A.Shareholders and the directors they appoint may have divergent interests
B.Auditors are paid a fixed fee regardless of audit quality
C.Companies must comply with international financial reporting standards
D.Dividends are taxed differently from capital gains
Explanation: Agency costs arise from the separation of ownership (shareholders, the principals) and control (directors, the agents). Because managers may pursue their own interests rather than maximising shareholder wealth, costs are incurred in monitoring, bonding and from any residual loss.
2The primary financial objective normally assumed for a listed company in corporate finance theory is to:
A.Maximise the wealth of its ordinary shareholders
B.Minimise the company's overall tax charge
C.Maximise the firm's market share
D.Maximise reported accounting profit each year
Explanation: Corporate finance theory assumes the firm seeks to maximise shareholder wealth, usually proxied by the long-run market value of the equity. This focuses on cash flows and risk over time rather than a single accounting figure.
3A key feature distinguishing a public limited company (plc) from a private limited company (Ltd) in the UK is that a plc:
A.May offer its shares to the public
B.Is exempt from preparing audited accounts
C.Cannot issue loan capital
D.Has unlimited liability for its shareholders
Explanation: A public limited company is permitted to offer its shares to the public and may have them listed on a stock exchange, whereas a private company cannot offer shares to the public. Both forms confer limited liability on members.
4Within a corporate governance framework, the principal role of non-executive directors is to:
A.Set their own remuneration without board approval
B.Manage the company's day-to-day operations
C.Provide independent oversight and challenge to executive management
D.Act as the external auditors of the company
Explanation: Non-executive directors bring independent judgement to the board, scrutinising the performance of executive management and helping protect shareholder interests. They typically sit on audit, remuneration and nomination committees.
5The 'comply or explain' principle that underpins the UK Corporate Governance Code means a listed company must:
A.Comply only with provisions chosen by its auditors
B.Follow every provision of the Code without exception
C.Either comply with a provision or explain why it has not
D.Obtain regulatory approval before deviating from any provision
Explanation: The Code operates on a 'comply or explain' basis: companies should apply its provisions, but where they depart they must explain to shareholders the reasons. This offers flexibility while preserving transparency and accountability.
6Which group is generally regarded as a primary 'internal' stakeholder of a company?
A.Trade suppliers
B.Government tax authorities
C.Employees
D.Local community groups
Explanation: Employees are internal stakeholders because they work within the organisation and are directly affected by its decisions. Shareholders and managers are also typically classed as internal stakeholders.
7A company limited by guarantee differs from a company limited by shares in that members' liability is limited to:
A.The amount they agree to contribute if the company is wound up
B.The nominal value of shares they hold
C.The market value of their shareholding
D.Nothing, as liability is always unlimited
Explanation: In a company limited by guarantee, members undertake to contribute a fixed amount to the assets if the company is wound up. Such companies, often non-profit bodies, have no share capital.
8The separation of the roles of chairman and chief executive in a listed company is recommended primarily to:
A.Eliminate the need for an audit committee
B.Reduce the company's payroll costs
C.Avoid an excessive concentration of power in one individual
D.Satisfy international accounting standards
Explanation: Splitting the chairman and CEO roles prevents one person from dominating both board leadership and executive decision-making, supporting independent oversight and effective challenge. This is a core governance recommendation.
9Which of the following best describes 'corporate social responsibility' (CSR) in the context of a company's objectives?
A.The duty to maximise short-term accounting profit only
B.A legal requirement to pay the highest possible dividends
C.Voluntary consideration of social and environmental impacts beyond legal minimums
D.A method of avoiding all corporate taxation
Explanation: CSR involves a company voluntarily taking responsibility for its impact on society and the environment beyond strict legal obligations. It reflects broader stakeholder considerations alongside shareholder wealth.
10A partnership formed under standard partnership law differs from an incorporated company chiefly because a traditional partnership:
A.Issues tradable ordinary shares
B.Has a legal personality separate from its partners
C.Generally exposes its partners to unlimited liability
D.Must publish audited annual accounts
Explanation: In an ordinary partnership the partners typically have unlimited personal liability for the firm's debts, and the partnership has no separate legal personality. This contrasts with the limited liability and separate legal status of a company.

About the IFoA CB1 Exam

IFoA Subject CB1 Business Finance is a Core Principles actuarial subject covering corporate governance, sources of finance and capital structure, the cost of capital, capital project appraisal, and the construction and interpretation of company accounts.

Exam sponsor: Institute and Faculty of Actuaries (IFoA). The requirements and fees below concern the certification or admission exam, separate from our free practice resources.

Assessment

One 3h20m computer-based written exam combining Paper A (written, ~70%) and Paper B (problem-based, ~30%)

Time Limit

3 hours 20 minutes

Passing Score

The IFoA does not publish a fixed pass mark; the pass standard is set by examiners each session

Exam / Certification Fees

Set by the IFoA exam fees schedule for each session

Exam sponsor website

Fees, eligibility, and exam policies can change. Confirm them with the exam sponsor before applying or paying.

Our practice resources: topics covered

We aim to reflect publicly available exam outlines and topic information in our study resources. Coverage, format, and difficulty may differ from the actual exam, and we cannot guarantee that every detail is accurate or current. Confirm exam requirements, fees, and policies with the official exam sponsor.

18%

Corporate governance and organisation

Understand company structures, agency theory and the principal-agent problem, the role and regulation of capital markets, corporate governance codes and 'comply or explain', stakeholders, directors' duties, and the maximisation of shareholder wealth.

35%

How corporates are financed

Work with short- and long-term sources of finance, ordinary and preference shares, debt and convertible instruments, leasing, trade credit and factoring, capital structure and leverage, the cost of capital and WACC, and mergers, acquisitions and growth.

15%

Evaluating projects

Appraise capital projects using net present value, internal rate of return and payback, identify relevant incremental cash flows including opportunity costs while excluding sunk costs, and apply a risk-adjusted cost of capital as the discount rate.

32%

Constructing and interpreting company accounts

Apply accounting concepts and the regulation of financial reporting, construct and interpret the income statement, balance sheet and cash flow statement, perform ratio and financial statement analysis, and cover working capital, taxation principles and elements of management accounting.

Preparing for the IFoA CB1 Exam

What You Need to Know

  • Passing score: The IFoA does not publish a fixed pass mark; the pass standard is set by examiners each session
  • Assessment: One 3h20m computer-based written exam combining Paper A (written, ~70%) and Paper B (problem-based, ~30%)
  • Time limit: 3 hours 20 minutes
  • Exam / certification fees: Set by the IFoA exam fees schedule for each session Official sources

Using Our Practice Resources

  • Work through all 100 available questions
  • Review every answer and explanation
  • Track weak areas and revisit them
  • Use our AI tutor for tough concepts

IFoA CB1: Suggested Study Strategy

1Treat governance and finance theory as application material: practise explaining agency costs, governance codes and shareholder-wealth maximisation in your own words, since CB1 awards about half its marks for application.
2Drill the core financial-statement mechanics until depreciation, accruals, cost of goods sold and the statement of cash flows are automatic, because constructing and interpreting accounts is 32% of the syllabus.
3For financing questions, learn the features of each instrument and the WACC, dividend-growth and CAPM formulas so you can move quickly from cost of equity to cost of capital.
4In project appraisal, always separate relevant incremental cash flows from sunk costs and include opportunity costs before discounting at a risk-adjusted rate.
5Use ratio analysis with judgement: practise stating what each ratio means and the limitations of comparison, not just the calculation, to score the higher-order marks.

Frequently Asked Questions

How is the IFoA CB1 exam assessed?

CB1 Business Finance is assessed by a single computer-based written exam of 3 hours and 20 minutes. It combines a written Paper A and a problem-based Paper B, using structured answers rather than multiple-choice questions.

How long is the IFoA CB1 exam?

The CB1 exam lasts 3 hours and 20 minutes and is sat as a computer-based exam in Word. The IFoA recommends around 150 hours of study to prepare for it.

What is the passing score for IFoA CB1?

The IFoA does not publish a fixed pass mark for CB1. The pass standard is set by the examiners for each exam session, so the required mark can vary between sittings.

What are the CB1 syllabus weightings?

For the 2026 syllabus the four areas are weighted Corporate governance and organisation 18%, How corporates are financed 35%, Evaluating projects 15%, and Constructing and interpreting company accounts 32%.

What topics does IFoA CB1 cover?

CB1 covers corporate governance and company structures, sources of finance, capital structure and leverage, the cost of capital, project appraisal using NPV and IRR, working capital, taxation principles, and the construction and interpretation of company accounts.

Are these practice questions multiple choice?

Yes. The real CB1 exam uses structured written and problem-based answers, but these 100 free questions are multiple choice designed as knowledge prep across the testable corporate-finance and accounting body of knowledge.