CERTIFIED FINANCIAL EXAMINER (CFE)
EXAM QUESTION AND CORRECT
ANSWERS (VERIFIED ANSWERS) PLUS
RATIONALES 2026 Q&A INSTANT
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1. The primary role of a Certified Financial Examiner is to:
A. Manage corporate investments
B. Audit public companies
C. Assess the financial condition and solvency of regulated entities
D. Provide tax planning advice
Answer: C
Rationale: Financial examiners evaluate the financial health, solvency, and
regulatory compliance of institutions such as insurers and banks.
2. Which financial statement provides information about an entity’s assets,
liabilities, and equity at a specific point in time?
A. Income statement
B. Cash flow statement
C. Statement of retained earnings
D. Balance sheet
Answer: D
Rationale: The balance sheet presents a snapshot of financial position at a given
date.
, 3. Risk-Based Capital (RBC) requirements are primarily designed to:
A. Increase profitability
B. Reduce operating expenses
C. Ensure institutions hold adequate capital relative to risk
D. Eliminate insolvency risk
Answer: C
Rationale: RBC frameworks align capital requirements with the level of financial
and operational risk.
4. Which ratio best measures an institution’s ability to meet short-term
obligations?
A. Debt-to-equity ratio
B. Return on assets
C. Current ratio
D. Operating margin
Answer: C
Rationale: The current ratio compares current assets to current liabilities to
assess liquidity.
5. Statutory accounting principles (SAP) differ from GAAP primarily because
SAP:
A. Emphasizes profitability
B. Is more complex
C. Focuses on solvency and conservatism
D. Eliminates disclosure requirements
Answer: C
Rationale: SAP prioritizes conservative valuation to protect policyholders and
creditors.
, 6. Which component is NOT part of the financial examination process?
A. Planning
B. Fieldwork
C. Reporting
D. Marketing analysis
Answer: D
Rationale: Marketing analysis is not a standard element of regulatory financial
examinations.
7. An adverse examination finding most directly affects:
A. Market share
B. Employee morale
C. Regulatory oversight and corrective actions
D. Customer satisfaction surveys
Answer: C
Rationale: Negative findings can trigger regulatory intervention or corrective
measures.
8. Which ratio measures profitability relative to total assets?
A. Return on equity
B. Net profit margin
C. Return on assets
D. Expense ratio
Answer: C
Rationale: ROA indicates how efficiently assets are used to generate earnings.
9. What is the main purpose of stress testing?
A. Predict exact future losses
B. Increase capital levels automatically
EXAM QUESTION AND CORRECT
ANSWERS (VERIFIED ANSWERS) PLUS
RATIONALES 2026 Q&A INSTANT
DOWNLOAD PDF
1. The primary role of a Certified Financial Examiner is to:
A. Manage corporate investments
B. Audit public companies
C. Assess the financial condition and solvency of regulated entities
D. Provide tax planning advice
Answer: C
Rationale: Financial examiners evaluate the financial health, solvency, and
regulatory compliance of institutions such as insurers and banks.
2. Which financial statement provides information about an entity’s assets,
liabilities, and equity at a specific point in time?
A. Income statement
B. Cash flow statement
C. Statement of retained earnings
D. Balance sheet
Answer: D
Rationale: The balance sheet presents a snapshot of financial position at a given
date.
, 3. Risk-Based Capital (RBC) requirements are primarily designed to:
A. Increase profitability
B. Reduce operating expenses
C. Ensure institutions hold adequate capital relative to risk
D. Eliminate insolvency risk
Answer: C
Rationale: RBC frameworks align capital requirements with the level of financial
and operational risk.
4. Which ratio best measures an institution’s ability to meet short-term
obligations?
A. Debt-to-equity ratio
B. Return on assets
C. Current ratio
D. Operating margin
Answer: C
Rationale: The current ratio compares current assets to current liabilities to
assess liquidity.
5. Statutory accounting principles (SAP) differ from GAAP primarily because
SAP:
A. Emphasizes profitability
B. Is more complex
C. Focuses on solvency and conservatism
D. Eliminates disclosure requirements
Answer: C
Rationale: SAP prioritizes conservative valuation to protect policyholders and
creditors.
, 6. Which component is NOT part of the financial examination process?
A. Planning
B. Fieldwork
C. Reporting
D. Marketing analysis
Answer: D
Rationale: Marketing analysis is not a standard element of regulatory financial
examinations.
7. An adverse examination finding most directly affects:
A. Market share
B. Employee morale
C. Regulatory oversight and corrective actions
D. Customer satisfaction surveys
Answer: C
Rationale: Negative findings can trigger regulatory intervention or corrective
measures.
8. Which ratio measures profitability relative to total assets?
A. Return on equity
B. Net profit margin
C. Return on assets
D. Expense ratio
Answer: C
Rationale: ROA indicates how efficiently assets are used to generate earnings.
9. What is the main purpose of stress testing?
A. Predict exact future losses
B. Increase capital levels automatically
