Wall Street Prep Redbook Exam
Questions and Answers 100%
PASS
What is the primary purpose of US GAAP? - CORRECT ANSWER-In the US,
the Securities and Exchange Commission ("SEC") authorizes the Financial
Accounting Standards Board ("FASB") to determine the set of accounting
rules followed by publicly traded companies.
Under FASB, financial statements are required to be prepared in accordance
with US Generally Accepted Accounting Principles ("US GAAP").
Through the standardization of financial reporting and ensuring all
financials are presented on a fair, consistent basis - the interests of
investors and lenders are protected.
What are the main sections of a 10-K? - CORRECT ANSWER-In a 10-K,
you'll find the three core financial statements, which are the income
statement, cash flow statement, and balance sheet. There'll also be a
,statement of shareholders' equity, a statement of comprehensive income,
and supplementary data and disclosures to accompany the financials.
Business Overview: Overview of the company's business divisions, strategy,
product or service offerings, seasonality, geographical footprint, and key
risks.
Management's Discussion & Analysis ("MD&A"): Commentary and
summarized analysis of the company's fiscal year result from the perspective
of the management team.
Financial Statements: The "Core 3": Income Statement, Balance Sheet, Cash
Flow Statement The "Other 2": Statement of Comprehensive Income,
Statement of Shareholders' Equity
What is the difference between the 10-K and 10-Q? - CORRECT ANSWER-
10-K: A 10-K is the annual report required to be filed with the SEC for any
public company in the U.S. The report is comprehensive and includes a full
overview of the business operations, commentary on recent performance by
management, risk factors, disclosures on changes in accounting policies -
and most importantly, the three core financial statements with
supplementary data.
© 2026 Copyright. All Rights Reserved. This document is
protected by copyright law
,10-Q: A 10-Q refers to the quarterly report required to be filed with the
SEC. Compared to the 10-K, this report is far more condensed in length and
depth, with the focus being on the quarterly financials with brief sections for
MD&A and supplementary disclosures.
Additional Differences: A few more differences are 10-Ks are required to be
audited by an independent accounting firm, but 10-Qs are only reviewed by
CPAs and left unaudited. 10-Ks must also be filed ~60-90 days after the
fiscal year ends, whereas 10-Qs must be submitted ~40-45 days after the
quarter ends.
Walk me through the three financial statements. - CORRECT ANSWER-
Income Statement ("IS"): The income statement shows a company's
profitability over a specified period, typically quarterly and annually. The
beginning line item is revenue and upon deducting various costs and
expenses, the ending line item is net income.
Balance Sheet ("BS"): The balance sheet is a snapshot of a company's
resources (assets) and sources of funding (liabilities and shareholders'
equity) at a specific point in time, such as the end of a quarter or fiscal year.
Cash Flow Statement ("CFS"): Under the indirect approach, the starting line
item is net income, which will be adjusted for non-cash items such as D&A
and changes in working capital to arrive at cash from operations. Cash from
, investing and financing activities are then added to cash from operations to
arrive at the net change in cash, which represents the actual cash
inflows/(outflows) in a given period.
Walk me through the income statement. - CORRECT ANSWER-The income
statement shows a company's accrual-based profitability over a specified
time period and facilitates the analysis of its historical growth and
operational performance. The table below lists the major income and
expense components of the income statement:
Net Revenue (or Sales): The income statement begins with revenue (often
called the "top line"), which represents the total value of all sales of goods
and delivery of services throughout a specified period.
Less: Cost of Goods Sold: COGS represents the costs directly tied to
producing revenue, such as the costs of materials and direct labor.
Gross Profit: Revenues - Cost of Goods Sold = Gross Profit
Less: Research & Development ("R&D"): R&D refers to developing new
products or procedures to improve their existing product/service offering
mix.
© 2026 Copyright. All Rights Reserved. This document is
protected by copyright law
Questions and Answers 100%
PASS
What is the primary purpose of US GAAP? - CORRECT ANSWER-In the US,
the Securities and Exchange Commission ("SEC") authorizes the Financial
Accounting Standards Board ("FASB") to determine the set of accounting
rules followed by publicly traded companies.
Under FASB, financial statements are required to be prepared in accordance
with US Generally Accepted Accounting Principles ("US GAAP").
Through the standardization of financial reporting and ensuring all
financials are presented on a fair, consistent basis - the interests of
investors and lenders are protected.
What are the main sections of a 10-K? - CORRECT ANSWER-In a 10-K,
you'll find the three core financial statements, which are the income
statement, cash flow statement, and balance sheet. There'll also be a
,statement of shareholders' equity, a statement of comprehensive income,
and supplementary data and disclosures to accompany the financials.
Business Overview: Overview of the company's business divisions, strategy,
product or service offerings, seasonality, geographical footprint, and key
risks.
Management's Discussion & Analysis ("MD&A"): Commentary and
summarized analysis of the company's fiscal year result from the perspective
of the management team.
Financial Statements: The "Core 3": Income Statement, Balance Sheet, Cash
Flow Statement The "Other 2": Statement of Comprehensive Income,
Statement of Shareholders' Equity
What is the difference between the 10-K and 10-Q? - CORRECT ANSWER-
10-K: A 10-K is the annual report required to be filed with the SEC for any
public company in the U.S. The report is comprehensive and includes a full
overview of the business operations, commentary on recent performance by
management, risk factors, disclosures on changes in accounting policies -
and most importantly, the three core financial statements with
supplementary data.
© 2026 Copyright. All Rights Reserved. This document is
protected by copyright law
,10-Q: A 10-Q refers to the quarterly report required to be filed with the
SEC. Compared to the 10-K, this report is far more condensed in length and
depth, with the focus being on the quarterly financials with brief sections for
MD&A and supplementary disclosures.
Additional Differences: A few more differences are 10-Ks are required to be
audited by an independent accounting firm, but 10-Qs are only reviewed by
CPAs and left unaudited. 10-Ks must also be filed ~60-90 days after the
fiscal year ends, whereas 10-Qs must be submitted ~40-45 days after the
quarter ends.
Walk me through the three financial statements. - CORRECT ANSWER-
Income Statement ("IS"): The income statement shows a company's
profitability over a specified period, typically quarterly and annually. The
beginning line item is revenue and upon deducting various costs and
expenses, the ending line item is net income.
Balance Sheet ("BS"): The balance sheet is a snapshot of a company's
resources (assets) and sources of funding (liabilities and shareholders'
equity) at a specific point in time, such as the end of a quarter or fiscal year.
Cash Flow Statement ("CFS"): Under the indirect approach, the starting line
item is net income, which will be adjusted for non-cash items such as D&A
and changes in working capital to arrive at cash from operations. Cash from
, investing and financing activities are then added to cash from operations to
arrive at the net change in cash, which represents the actual cash
inflows/(outflows) in a given period.
Walk me through the income statement. - CORRECT ANSWER-The income
statement shows a company's accrual-based profitability over a specified
time period and facilitates the analysis of its historical growth and
operational performance. The table below lists the major income and
expense components of the income statement:
Net Revenue (or Sales): The income statement begins with revenue (often
called the "top line"), which represents the total value of all sales of goods
and delivery of services throughout a specified period.
Less: Cost of Goods Sold: COGS represents the costs directly tied to
producing revenue, such as the costs of materials and direct labor.
Gross Profit: Revenues - Cost of Goods Sold = Gross Profit
Less: Research & Development ("R&D"): R&D refers to developing new
products or procedures to improve their existing product/service offering
mix.
© 2026 Copyright. All Rights Reserved. This document is
protected by copyright law
