CFAI Practice: M06 — Business Models and Risks

Total: 5 questions

Source: CFA Institute Practice Questions — Corporate Issuers (2026)


Question 1

A business model most accurately describes:

  • A. a company’s financial statements and capital structure
  • B. the way a firm creates value for customers and captures value for itself
  • C. the regulatory environment in which a company operates

Question 2

A company’s value proposition is best described as the:

  • A. total revenue generated from all product lines
  • B. reason customers choose the company’s products or services over competitors
  • C. company’s strategy for minimizing production costs

Question 3

A software company offers a basic version of its product for free and charges for premium features. This pricing model is best described as:

  • A. subscription-based
  • B. freemium
  • C. razor-and-blade

Question 4

A ride-sharing platform becomes more valuable to riders as more drivers join, and more valuable to drivers as more riders use the platform. This characteristic is best described as:

  • A. economies of scale
  • B. network effects
  • C. vertical integration

Question 5

A company’s business model is most likely at risk of disruption when:

  • A. it operates in a highly regulated industry with high barriers to entry
  • B. new technologies or competitors can deliver the same value proposition at lower cost or greater convenience
  • C. the company has a large and loyal customer base with high switching costs