Series 65 Financial Reporting & Analysis Practice Questions
Financial Reporting & Analysis makes up 4 of every 50 questions on a Tigertest Series 65 practice test. Here are 10 of the 16 questions on it, each with the answer and the reason.
Updated by the Tigertest team. Based on NASAA's Series 65 test specifications. Original questions; 50 per test, weighted like the real 130-question exam. Not affiliated with NASAA or FINRA.
1. Which financial statement shows a company's assets, liabilities and equity at a single point in time?
- A.The proxy statement
- B.The balance sheet
- C.The income statement
- D.The cash flow statement
Answer: B. The balance sheet is a snapshot on one date: assets equal liabilities plus shareholders' equity. The income statement covers a period.
2. A company records revenue when it delivers a product, even though the customer pays 60 days later. This is:
- A.Tax basis accounting
- B.Mark-to-market accounting
- C.Cash basis accounting
- D.Accrual accounting
Answer: D. Accrual accounting books revenue when earned and expenses when incurred, regardless of when cash moves. Cash basis waits for the payment.
3. An auditor issues a qualified opinion on a company's financial statements. This means:
- A.Clean except for one matter
- B.The company is about to fail
- C.The statements are fully clean
- D.The auditor found outright fraud
Answer: A. A qualified opinion says the statements are fairly presented except for a specific matter. An unqualified opinion is the clean one investors prefer.
4. Which SEC filing is a company's audited annual report?
- A.Form 8-K
- B.Form S-1
- C.Form 10-K
- D.Form 10-Q
Answer: C. The 10-K is the annual report with audited statements. The 10-Q is quarterly and unaudited, and the 8-K reports material events between them.
5. A company has current assets of $840,000, inventory of $360,000 and current liabilities of $400,000. Its quick ratio is:
- A.0.9
- B.1.5
- C.1.2
- D.2.1
Answer: C. Quick ratio = (current assets - inventory) / current liabilities = $480,000 / $400,000 = 1.2. Including inventory gives the current ratio of 2.1.
6. A firm has total debt of $6 million and shareholders' equity of $15 million. Its debt-to-equity ratio is:
- A.0.4
- B.0.6
- C.0.29
- D.2.5
Answer: A. Debt-to-equity = $6 million / $15 million = 0.4. Dividing equity by debt (2.5) inverts it; 0.29 is debt over debt plus equity.
7. A stock trades at $63 and earned $4.50 a share last year. Its price-to-earnings ratio is:
- A.18
- B.4.5
- C.12
- D.14
Answer: D. P/E = price / earnings per share = $63 / $4.50 = 14. A higher P/E means investors pay more for each dollar of earnings.
8. A stock trades at $27 with a book value of $18 a share. Its price-to-book ratio is:
- A.1.8
- B.1.5
- C.0.67
- D.2.7
Answer: B. P/B = $27 / $18 = 1.5. Value investors often screen for low price-to-book stocks.
9. A client will receive $10,000 in three years. At a 6% discount rate, its present value is closest to:
- A.$9,434
- B.$8,396
- C.$11,910
- D.$8,200
Answer: B. PV = $10,000 / 1.06^3 = $10,000 / 1.191 = about $8,396. $9,434 discounts only one year, and $11,910 is a future value.
10. A project's net present value is positive at the investor's required rate of return. This means the project's IRR is:
- A.Equal to the required return
- B.Negative
- C.Below the required return
- D.Above the required return
Answer: D. NPV is zero when the discount rate equals the IRR. A positive NPV at the required rate means the IRR is higher than that rate.
Practice all 16 financial reporting & analysis questions, and the rest of the 200-question bank, in the free Series 65 training sets. Questions you miss come back until you have mastered them.
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