WALL STREET PREP PREMIUM
ACTUAL EXAM PAPER 2026
QUESTIONS WITH ANSWERS GRADED
A+
◍ Income Statement.
Answer: Revenue ->Gross Profit ->EBIT ->Pretax Profit ->Net Income
->EBITDA ->Adjusted EBITDA
◍ EBIT.
Answer: [Revenue - COGS] - Operating Expenses - D&A
◍ Pretax Profit.
Answer: [Revenue - COGS - Operating Expenses - D&A] + Interest Income
- Interest Expense - Other Expense
◍ What is the primary purpose of US GAAP?.
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.
◍ Net Income.
Answer: [Revenue - COGS - Operating Expenses + Interest Income -
Interest Expense - Other Expense] - Taxes
◍ What are the main sections of a 10-K?.
, 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?.
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. 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..
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..
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 ProfitLess: Research & Development ("R&D"): R&D refers to
developing new products or procedures to improve their existing
product/service offering mix.EBITDA: Gross Profit - SG&A - R&D =
EBITDA. EBITDA stands for: Earnings Before Interest, Taxes,
Depreciation & Amortization.Less: Depreciation & Amortization ("D&A"):
D&A is a non-cash expense that estimates the annual reduction in the value
of fixed and intangible assetsOperating Income ("EBIT"): EBITDA - D&A
= Operating Income (or EBIT) EBIT stands for: Earnings Before Interest
and Taxes.Less: Interest Expense, net: Interest expense from debt, net of
interest income generated from investments.Pre-Tax Income ("EBT"): EBIT
- Interest Expense, net = Pre-Tax Income (or "Earnings Before Tax")Less:
Tax Expense: Tax liability recorded by a company for book purposes.Net
Income: EBT - Tax Expense = Net Income (referred to as the "bottom line")
◍ Walk me through the balance sheet..
, Answer: The balance sheet shows a company's assets, liabilities, and equity
sections at a specific point in time. The fundamental accounting equation is:
Assets = Liabilities + Shareholders' Equity. The assets belonging to a
company must have been funded somehow, so assets will always be equal to
the sum of liabilities and equity. Assets Section: Assets are organized in the
order of liquidity, with "Current Assets" being assets that can be converted
into cash within a year, such as cash itself, along with marketable securities,
accounts receivable, prepaid expenses, and inventories. "Long-Term Assets"
include property, plant, and equipment (PP&E), intangible assets, goodwill,
and long-term investments. Liabilities Section: Liabilities are listed in the
order of how close they're to coming due. "Current Liabilities" include
accounts payable, accrued expenses, and short-term debt, while "Long-Term
Liabilities" include items such as long-term debt, deferred revenue, and
deferred income taxes. Shareholders' Equity Section: The equity section
consists of common stock, additional paid-in capital (APIC), treasury stock,
and retained earnings.
◍ EBITDA.
Answer: [Revenue - COGS - Operating Expenses - D&A] + D&A
◍ Adjusted EBITDA.
Answer: [Revenue - Cogs - Operating Expenses - D&A + D&A] + Stock
Based Compensation
◍ Cash.
Answer: asset
◍ Prepaid Expenses.
Answer: asset
◍ Could you give further context on what assets, liabilities, and equity each
represent?.
Answer: Assets: Assets are resources with economic value that can be sold
for money or bring positive monetary benefits in the future. For example,
cash and marketable securities are a store of monetary value that can be
invested to earn interest/returns, accounts receivable are payments due from
ACTUAL EXAM PAPER 2026
QUESTIONS WITH ANSWERS GRADED
A+
◍ Income Statement.
Answer: Revenue ->Gross Profit ->EBIT ->Pretax Profit ->Net Income
->EBITDA ->Adjusted EBITDA
◍ EBIT.
Answer: [Revenue - COGS] - Operating Expenses - D&A
◍ Pretax Profit.
Answer: [Revenue - COGS - Operating Expenses - D&A] + Interest Income
- Interest Expense - Other Expense
◍ What is the primary purpose of US GAAP?.
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.
◍ Net Income.
Answer: [Revenue - COGS - Operating Expenses + Interest Income -
Interest Expense - Other Expense] - Taxes
◍ What are the main sections of a 10-K?.
, 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?.
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. 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..
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..
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 ProfitLess: Research & Development ("R&D"): R&D refers to
developing new products or procedures to improve their existing
product/service offering mix.EBITDA: Gross Profit - SG&A - R&D =
EBITDA. EBITDA stands for: Earnings Before Interest, Taxes,
Depreciation & Amortization.Less: Depreciation & Amortization ("D&A"):
D&A is a non-cash expense that estimates the annual reduction in the value
of fixed and intangible assetsOperating Income ("EBIT"): EBITDA - D&A
= Operating Income (or EBIT) EBIT stands for: Earnings Before Interest
and Taxes.Less: Interest Expense, net: Interest expense from debt, net of
interest income generated from investments.Pre-Tax Income ("EBT"): EBIT
- Interest Expense, net = Pre-Tax Income (or "Earnings Before Tax")Less:
Tax Expense: Tax liability recorded by a company for book purposes.Net
Income: EBT - Tax Expense = Net Income (referred to as the "bottom line")
◍ Walk me through the balance sheet..
, Answer: The balance sheet shows a company's assets, liabilities, and equity
sections at a specific point in time. The fundamental accounting equation is:
Assets = Liabilities + Shareholders' Equity. The assets belonging to a
company must have been funded somehow, so assets will always be equal to
the sum of liabilities and equity. Assets Section: Assets are organized in the
order of liquidity, with "Current Assets" being assets that can be converted
into cash within a year, such as cash itself, along with marketable securities,
accounts receivable, prepaid expenses, and inventories. "Long-Term Assets"
include property, plant, and equipment (PP&E), intangible assets, goodwill,
and long-term investments. Liabilities Section: Liabilities are listed in the
order of how close they're to coming due. "Current Liabilities" include
accounts payable, accrued expenses, and short-term debt, while "Long-Term
Liabilities" include items such as long-term debt, deferred revenue, and
deferred income taxes. Shareholders' Equity Section: The equity section
consists of common stock, additional paid-in capital (APIC), treasury stock,
and retained earnings.
◍ EBITDA.
Answer: [Revenue - COGS - Operating Expenses - D&A] + D&A
◍ Adjusted EBITDA.
Answer: [Revenue - Cogs - Operating Expenses - D&A + D&A] + Stock
Based Compensation
◍ Cash.
Answer: asset
◍ Prepaid Expenses.
Answer: asset
◍ Could you give further context on what assets, liabilities, and equity each
represent?.
Answer: Assets: Assets are resources with economic value that can be sold
for money or bring positive monetary benefits in the future. For example,
cash and marketable securities are a store of monetary value that can be
invested to earn interest/returns, accounts receivable are payments due from
