Research Analyst Series 86 Part I Exam Questions and Answers
Question 1. Which term best matches the following description: central bank actions affecting money, credit, liquidity, and interest-rate
conditions?
A. Net present value
B. Debt-to-equity ratio
C. Days sales outstanding
D. Monetary policy
Correct Answer: D. Monetary policy
Explanation: Monetary policy is the correct concept because it is central bank actions affecting money, credit, liquidity, and interest-rate
conditions. The wording in the question points to the defining feature rather than to a merely associated idea. The other choices are legitimate
exam concepts, but their definitions do not match the facts stated here. Recognizing that defining feature is the most reliable way to identify
Monetary policy.
Question 2. A company reports net income of $720,000,000, preferred dividends of $100,000,000, and 120 million weighted-average
common shares outstanding. What is basic EPS?
A. $3.88
B. $5.17
C. $4.39
D. $5.94
Correct Answer: B. $5.17
Explanation: Basic EPS equals income available to common shareholders divided by weighted-average common shares outstanding. Income
available to common is $620,000,000, so dividing by 120 million shares produces $5.17 per share. Preferred dividends are subtracted because
they are not available to common shareholders. A diluted EPS calculation could differ if the company had potentially dilutive securities, but those
are not part of the facts given.
Question 3. Which statement about 10-K is most accurate?
A. Net income or another defined earnings measure divided by average total assets
B. Revenue divided by average assets, measuring how efficiently assets generate sales
C. A public company's annual SEC filing containing audited financial statements and extensive business and risk disclosures
D. The difference between reported earnings and the market's prior expectation or consensus estimate
Correct Answer: C. A public company's annual SEC filing containing audited financial statements and extensive business and risk disclosures
Explanation: 10-K is correctly described as a public company's annual SEC filing containing audited financial statements and extensive
business and risk disclosures. That description captures the core characteristic tested by this item. The remaining descriptions belong to different
concepts and would lead to a different regulatory, product, accounting, or operational analysis. On exam questions, match the term to its defining
feature before considering secondary details.
Question 4. A comparable company has enterprise value of $7750 million and EBITDA of $250 million. What is its EV/EBITDA multiple?
A. 31.0x
B. 23.2x
C. 26.3x
D. 35.6x
Correct Answer: A. 31.0x
Explanation: EV/EBITDA equals enterprise value divided by EBITDA. Dividing $7750 million by $250 million gives 31.0x. Because enterprise
value reflects both debt and equity capital, EBITDA is a commonly paired pre-interest operating metric. A price/earnings multiple instead uses
equity value or share price and an earnings measure available to common shareholders.
1
,Question 5. Which choice correctly distinguishes Recommendation rating from Quick ratio?
A. Recommendation rating: a research opinion category such as buy, hold, or sell, defined according to the research firm's rating system;
Quick ratio: liquid current assets such as cash, marketable securities, and qualifying receivables divided by current liabilities
B. Recommendation rating: liquid current assets such as cash, marketable securities, and qualifying receivables divided by current liabilities;
Quick ratio: a research opinion category such as buy, hold, or sell, defined according to the research firm's rating system
C. Recommendation rating: the difference between reported earnings and the market's prior expectation or consensus estimate; Quick ratio:
liquid current assets such as cash, marketable securities, and qualifying receivables divided by current liabilities
D. Recommendation rating: a research opinion category such as buy, hold, or sell, defined according to the research firm's rating system;
Quick ratio: the blended required return on debt and equity capital weighted by their capital structure proportions, with debt commonly
adjusted for taxes
Correct Answer: A. Recommendation rating: a research opinion category such as buy, hold, or sell, defined according to the research firm's
rating system; Quick ratio: liquid current assets such as cash, marketable securities, and qualifying receivables divided by current liabilities
Explanation: Recommendation rating means a research opinion category such as buy, hold, or sell, defined according to the research firm's
rating system, whereas Quick ratio means liquid current assets such as cash, marketable securities, and qualifying receivables divided by current
liabilities. The correct choice keeps the two concepts separate and assigns each description to the proper term. The distractors either reverse the
concepts or substitute a feature belonging to another topic. That distinction matters because the two terms can lead to different regulatory,
economic, or operational consequences.
Question 6. A research analyst is reviewing a situation described as follows: aggregated forecasts from multiple analysts used as a
market reference point for expected financial results. Which concept is most directly involved?
A. Book value
B. Consensus estimates
C. Dividend yield
D. Industry analysis
Correct Answer: B. Consensus estimates
Explanation: Consensus estimates is the best answer because it is aggregated forecasts from multiple analysts used as a market reference
point for expected financial results. The scenario gives the research analyst facts that point directly to that concept. The other choices can arise
in related securities situations but do not fit the specific description provided. Applying the precise definition to the facts is the best way to resolve
this type of scenario.
Question 7. Which concept-and-description pairing is correctly matched?
A. Amortization - a terminal value method assuming cash flow grows at a constant sustainable rate indefinitely
B. Secondary research - a leverage measure comparing debt with shareholders' equity
C. Capital-intensive industry - earnings before interest, taxes, depreciation, and amortization
D. Variant perception - an analytical view that differs materially from prevailing market expectations and can create an investment opportunity
if correct
Correct Answer: D. Variant perception - an analytical view that differs materially from prevailing market expectations and can create an
investment opportunity if correct
Explanation: Only the pairing for Variant perception is accurate: it is an analytical view that differs materially from prevailing market expectations
and can create an investment opportunity if correct. Each incorrect choice attaches a valid-sounding description to the wrong concept. Because
the distractors are drawn from related exam material, they can appear plausible unless both parts of the pairing are checked. Verify the term and
its defining feature together before selecting a matched pair.
2
,Question 8. A candidate says Secondary research and Earnings surprise are interchangeable. Which response most accurately corrects
that statement?
A. They are identical because both mean analysis of information already produced by sources such as filings, industry reports, databases, and
published statistics.
B. They are different only because Secondary research is research gathered from customers, suppliers, distributors, or other industry
participants to assess business conditions, subject to legal and compliance controls, while Earnings surprise is the difference between
reported earnings and the market's prior expectation or consensus estimate.
C. They are different: Secondary research is analysis of information already produced by sources such as filings, industry reports, databases,
and published statistics, while Earnings surprise is the difference between reported earnings and the market's prior expectation or
consensus estimate.
D. They are different only because Secondary research is analysis of information already produced by sources such as filings, industry
reports, databases, and published statistics, while Earnings surprise is the use of debt or other fixed financing obligations that magnifies
changes in returns to equity holders.
Correct Answer: C. They are different: Secondary research is analysis of information already produced by sources such as filings, industry
reports, databases, and published statistics, while Earnings surprise is the difference between reported earnings and the market's prior
expectation or consensus estimate.
Explanation: Secondary research and Earnings surprise are not interchangeable because the first is analysis of information already produced
by sources such as filings, industry reports, databases, and published statistics and the second is the difference between reported earnings and
the market's prior expectation or consensus estimate. The correct response identifies the defining feature of each concept without blending them
together. The other choices either treat distinct concepts as identical or assign an unrelated definition to one of them. Comparison questions are
best answered by isolating the feature that changes the legal, economic, or operational result.
Question 9. Which answer correctly matches both Gross profit and Primary research to their respective meanings?
A. Gross profit -> information gathered directly through interviews, surveys, observations, or other original research methods; Primary
research -> revenue minus cost of goods sold
B. Gross profit -> revenue minus cost of goods sold; Primary research -> information gathered directly through interviews, surveys,
observations, or other original research methods
C. Gross profit -> amounts owed by customers for goods or services already provided; Primary research -> information gathered directly
through interviews, surveys, observations, or other original research methods
D. Gross profit -> revenue minus cost of goods sold; Primary research -> an industry whose demand and earnings tend to be less sensitive to
economic cycles
Correct Answer: B. Gross profit -> revenue minus cost of goods sold; Primary research -> information gathered directly through interviews,
surveys, observations, or other original research methods
Explanation: The correct match identifies Gross profit as revenue minus cost of goods sold and Primary research as information gathered
directly through interviews, surveys, observations, or other original research methods. Both halves of the selected option are therefore accurate.
Each distractor contains at least one mismatched definition even though the language is drawn from a related topic. When an answer choice
contains two propositions, verify each proposition independently before selecting it.
Question 10. Which term best matches the following description: analysis of competitive structure, growth, cyclicality, regulation, supply
and demand, and economics within a business sector?
A. Operating income
B. Deferred tax liability
C. Gross profit
D. Industry analysis
Correct Answer: D. Industry analysis
Explanation: Industry analysis is the correct concept because it is analysis of competitive structure, growth, cyclicality, regulation, supply and
demand, and economics within a business sector. The wording in the question points to the defining feature rather than to a merely associated
idea. The other choices are legitimate exam concepts, but their definitions do not match the facts stated here. Recognizing that defining feature is
the most reliable way to identify Industry analysis.
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, Question 11. A comparable company has enterprise value of $6750 million and EBITDA of $400 million. What is its EV/EBITDA
multiple?
A. 12.7x
B. 14.3x
C. 16.9x
D. 19.4x
Correct Answer: C. 16.9x
Explanation: EV/EBITDA equals enterprise value divided by EBITDA. Dividing $6750 million by $400 million gives 16.9x. Because enterprise
value reflects both debt and equity capital, EBITDA is a commonly paired pre-interest operating metric. A price/earnings multiple instead uses
equity value or share price and an earnings measure available to common shareholders.
Question 12. Which statement about Segment reporting is most accurate?
A. Financial disclosure separating material business components so analysts can evaluate differing economics, growth, and profitability
B. A relative valuation method using observed trading multiples for similar public companies
C. Operating income divided by revenue
D. Earnings before interest and taxes
Correct Answer: A. Financial disclosure separating material business components so analysts can evaluate differing economics, growth, and
profitability
Explanation: Segment reporting is correctly described as financial disclosure separating material business components so analysts can
evaluate differing economics, growth, and profitability. That description captures the core characteristic tested by this item. The remaining
descriptions belong to different concepts and would lead to a different regulatory, product, accounting, or operational analysis. On exam
questions, match the term to its defining feature before considering secondary details.
Question 13. Which choice correctly distinguishes Variant perception from 10-Q?
A. Variant perception: a public company's quarterly SEC filing containing interim financial statements and updates; 10-Q: an analytical view
that differs materially from prevailing market expectations and can create an investment opportunity if correct
B. Variant perception: an analytical view that differs materially from prevailing market expectations and can create an investment opportunity if
correct; 10-Q: a public company's quarterly SEC filing containing interim financial statements and updates
C. Variant perception: the yield difference between a credit-risky debt security and a benchmark of comparable maturity; 10-Q: a public
company's quarterly SEC filing containing interim financial statements and updates
D. Variant perception: an analytical view that differs materially from prevailing market expectations and can create an investment opportunity if
correct; 10-Q: enterprise value divided by EBIT
Correct Answer: B. Variant perception: an analytical view that differs materially from prevailing market expectations and can create an
investment opportunity if correct; 10-Q: a public company's quarterly SEC filing containing interim financial statements and updates
Explanation: Variant perception means an analytical view that differs materially from prevailing market expectations and can create an
investment opportunity if correct, whereas 10-Q means a public company's quarterly SEC filing containing interim financial statements and
updates. The correct choice keeps the two concepts separate and assigns each description to the proper term. The distractors either reverse the
concepts or substitute a feature belonging to another topic. That distinction matters because the two terms can lead to different regulatory,
economic, or operational consequences.
Question 14. A research analyst is reviewing a situation described as follows: a measure of the resources available to meet interest
expense, commonly EBIT or EBITDA divided by interest expense. Which concept is most directly involved?
A. Dividend payout ratio
B. Defensive industry
C. Interest coverage
D. Market risk premium
Correct Answer: C. Interest coverage
Explanation: Interest coverage is the best answer because it is a measure of the resources available to meet interest expense, commonly EBIT
or EBITDA divided by interest expense. The scenario gives the research analyst facts that point directly to that concept. The other choices can
arise in related securities situations but do not fit the specific description provided. Applying the precise definition to the facts is the best way to
resolve this type of scenario.
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Question 1. Which term best matches the following description: central bank actions affecting money, credit, liquidity, and interest-rate
conditions?
A. Net present value
B. Debt-to-equity ratio
C. Days sales outstanding
D. Monetary policy
Correct Answer: D. Monetary policy
Explanation: Monetary policy is the correct concept because it is central bank actions affecting money, credit, liquidity, and interest-rate
conditions. The wording in the question points to the defining feature rather than to a merely associated idea. The other choices are legitimate
exam concepts, but their definitions do not match the facts stated here. Recognizing that defining feature is the most reliable way to identify
Monetary policy.
Question 2. A company reports net income of $720,000,000, preferred dividends of $100,000,000, and 120 million weighted-average
common shares outstanding. What is basic EPS?
A. $3.88
B. $5.17
C. $4.39
D. $5.94
Correct Answer: B. $5.17
Explanation: Basic EPS equals income available to common shareholders divided by weighted-average common shares outstanding. Income
available to common is $620,000,000, so dividing by 120 million shares produces $5.17 per share. Preferred dividends are subtracted because
they are not available to common shareholders. A diluted EPS calculation could differ if the company had potentially dilutive securities, but those
are not part of the facts given.
Question 3. Which statement about 10-K is most accurate?
A. Net income or another defined earnings measure divided by average total assets
B. Revenue divided by average assets, measuring how efficiently assets generate sales
C. A public company's annual SEC filing containing audited financial statements and extensive business and risk disclosures
D. The difference between reported earnings and the market's prior expectation or consensus estimate
Correct Answer: C. A public company's annual SEC filing containing audited financial statements and extensive business and risk disclosures
Explanation: 10-K is correctly described as a public company's annual SEC filing containing audited financial statements and extensive
business and risk disclosures. That description captures the core characteristic tested by this item. The remaining descriptions belong to different
concepts and would lead to a different regulatory, product, accounting, or operational analysis. On exam questions, match the term to its defining
feature before considering secondary details.
Question 4. A comparable company has enterprise value of $7750 million and EBITDA of $250 million. What is its EV/EBITDA multiple?
A. 31.0x
B. 23.2x
C. 26.3x
D. 35.6x
Correct Answer: A. 31.0x
Explanation: EV/EBITDA equals enterprise value divided by EBITDA. Dividing $7750 million by $250 million gives 31.0x. Because enterprise
value reflects both debt and equity capital, EBITDA is a commonly paired pre-interest operating metric. A price/earnings multiple instead uses
equity value or share price and an earnings measure available to common shareholders.
1
,Question 5. Which choice correctly distinguishes Recommendation rating from Quick ratio?
A. Recommendation rating: a research opinion category such as buy, hold, or sell, defined according to the research firm's rating system;
Quick ratio: liquid current assets such as cash, marketable securities, and qualifying receivables divided by current liabilities
B. Recommendation rating: liquid current assets such as cash, marketable securities, and qualifying receivables divided by current liabilities;
Quick ratio: a research opinion category such as buy, hold, or sell, defined according to the research firm's rating system
C. Recommendation rating: the difference between reported earnings and the market's prior expectation or consensus estimate; Quick ratio:
liquid current assets such as cash, marketable securities, and qualifying receivables divided by current liabilities
D. Recommendation rating: a research opinion category such as buy, hold, or sell, defined according to the research firm's rating system;
Quick ratio: the blended required return on debt and equity capital weighted by their capital structure proportions, with debt commonly
adjusted for taxes
Correct Answer: A. Recommendation rating: a research opinion category such as buy, hold, or sell, defined according to the research firm's
rating system; Quick ratio: liquid current assets such as cash, marketable securities, and qualifying receivables divided by current liabilities
Explanation: Recommendation rating means a research opinion category such as buy, hold, or sell, defined according to the research firm's
rating system, whereas Quick ratio means liquid current assets such as cash, marketable securities, and qualifying receivables divided by current
liabilities. The correct choice keeps the two concepts separate and assigns each description to the proper term. The distractors either reverse the
concepts or substitute a feature belonging to another topic. That distinction matters because the two terms can lead to different regulatory,
economic, or operational consequences.
Question 6. A research analyst is reviewing a situation described as follows: aggregated forecasts from multiple analysts used as a
market reference point for expected financial results. Which concept is most directly involved?
A. Book value
B. Consensus estimates
C. Dividend yield
D. Industry analysis
Correct Answer: B. Consensus estimates
Explanation: Consensus estimates is the best answer because it is aggregated forecasts from multiple analysts used as a market reference
point for expected financial results. The scenario gives the research analyst facts that point directly to that concept. The other choices can arise
in related securities situations but do not fit the specific description provided. Applying the precise definition to the facts is the best way to resolve
this type of scenario.
Question 7. Which concept-and-description pairing is correctly matched?
A. Amortization - a terminal value method assuming cash flow grows at a constant sustainable rate indefinitely
B. Secondary research - a leverage measure comparing debt with shareholders' equity
C. Capital-intensive industry - earnings before interest, taxes, depreciation, and amortization
D. Variant perception - an analytical view that differs materially from prevailing market expectations and can create an investment opportunity
if correct
Correct Answer: D. Variant perception - an analytical view that differs materially from prevailing market expectations and can create an
investment opportunity if correct
Explanation: Only the pairing for Variant perception is accurate: it is an analytical view that differs materially from prevailing market expectations
and can create an investment opportunity if correct. Each incorrect choice attaches a valid-sounding description to the wrong concept. Because
the distractors are drawn from related exam material, they can appear plausible unless both parts of the pairing are checked. Verify the term and
its defining feature together before selecting a matched pair.
2
,Question 8. A candidate says Secondary research and Earnings surprise are interchangeable. Which response most accurately corrects
that statement?
A. They are identical because both mean analysis of information already produced by sources such as filings, industry reports, databases, and
published statistics.
B. They are different only because Secondary research is research gathered from customers, suppliers, distributors, or other industry
participants to assess business conditions, subject to legal and compliance controls, while Earnings surprise is the difference between
reported earnings and the market's prior expectation or consensus estimate.
C. They are different: Secondary research is analysis of information already produced by sources such as filings, industry reports, databases,
and published statistics, while Earnings surprise is the difference between reported earnings and the market's prior expectation or
consensus estimate.
D. They are different only because Secondary research is analysis of information already produced by sources such as filings, industry
reports, databases, and published statistics, while Earnings surprise is the use of debt or other fixed financing obligations that magnifies
changes in returns to equity holders.
Correct Answer: C. They are different: Secondary research is analysis of information already produced by sources such as filings, industry
reports, databases, and published statistics, while Earnings surprise is the difference between reported earnings and the market's prior
expectation or consensus estimate.
Explanation: Secondary research and Earnings surprise are not interchangeable because the first is analysis of information already produced
by sources such as filings, industry reports, databases, and published statistics and the second is the difference between reported earnings and
the market's prior expectation or consensus estimate. The correct response identifies the defining feature of each concept without blending them
together. The other choices either treat distinct concepts as identical or assign an unrelated definition to one of them. Comparison questions are
best answered by isolating the feature that changes the legal, economic, or operational result.
Question 9. Which answer correctly matches both Gross profit and Primary research to their respective meanings?
A. Gross profit -> information gathered directly through interviews, surveys, observations, or other original research methods; Primary
research -> revenue minus cost of goods sold
B. Gross profit -> revenue minus cost of goods sold; Primary research -> information gathered directly through interviews, surveys,
observations, or other original research methods
C. Gross profit -> amounts owed by customers for goods or services already provided; Primary research -> information gathered directly
through interviews, surveys, observations, or other original research methods
D. Gross profit -> revenue minus cost of goods sold; Primary research -> an industry whose demand and earnings tend to be less sensitive to
economic cycles
Correct Answer: B. Gross profit -> revenue minus cost of goods sold; Primary research -> information gathered directly through interviews,
surveys, observations, or other original research methods
Explanation: The correct match identifies Gross profit as revenue minus cost of goods sold and Primary research as information gathered
directly through interviews, surveys, observations, or other original research methods. Both halves of the selected option are therefore accurate.
Each distractor contains at least one mismatched definition even though the language is drawn from a related topic. When an answer choice
contains two propositions, verify each proposition independently before selecting it.
Question 10. Which term best matches the following description: analysis of competitive structure, growth, cyclicality, regulation, supply
and demand, and economics within a business sector?
A. Operating income
B. Deferred tax liability
C. Gross profit
D. Industry analysis
Correct Answer: D. Industry analysis
Explanation: Industry analysis is the correct concept because it is analysis of competitive structure, growth, cyclicality, regulation, supply and
demand, and economics within a business sector. The wording in the question points to the defining feature rather than to a merely associated
idea. The other choices are legitimate exam concepts, but their definitions do not match the facts stated here. Recognizing that defining feature is
the most reliable way to identify Industry analysis.
3
, Question 11. A comparable company has enterprise value of $6750 million and EBITDA of $400 million. What is its EV/EBITDA
multiple?
A. 12.7x
B. 14.3x
C. 16.9x
D. 19.4x
Correct Answer: C. 16.9x
Explanation: EV/EBITDA equals enterprise value divided by EBITDA. Dividing $6750 million by $400 million gives 16.9x. Because enterprise
value reflects both debt and equity capital, EBITDA is a commonly paired pre-interest operating metric. A price/earnings multiple instead uses
equity value or share price and an earnings measure available to common shareholders.
Question 12. Which statement about Segment reporting is most accurate?
A. Financial disclosure separating material business components so analysts can evaluate differing economics, growth, and profitability
B. A relative valuation method using observed trading multiples for similar public companies
C. Operating income divided by revenue
D. Earnings before interest and taxes
Correct Answer: A. Financial disclosure separating material business components so analysts can evaluate differing economics, growth, and
profitability
Explanation: Segment reporting is correctly described as financial disclosure separating material business components so analysts can
evaluate differing economics, growth, and profitability. That description captures the core characteristic tested by this item. The remaining
descriptions belong to different concepts and would lead to a different regulatory, product, accounting, or operational analysis. On exam
questions, match the term to its defining feature before considering secondary details.
Question 13. Which choice correctly distinguishes Variant perception from 10-Q?
A. Variant perception: a public company's quarterly SEC filing containing interim financial statements and updates; 10-Q: an analytical view
that differs materially from prevailing market expectations and can create an investment opportunity if correct
B. Variant perception: an analytical view that differs materially from prevailing market expectations and can create an investment opportunity if
correct; 10-Q: a public company's quarterly SEC filing containing interim financial statements and updates
C. Variant perception: the yield difference between a credit-risky debt security and a benchmark of comparable maturity; 10-Q: a public
company's quarterly SEC filing containing interim financial statements and updates
D. Variant perception: an analytical view that differs materially from prevailing market expectations and can create an investment opportunity if
correct; 10-Q: enterprise value divided by EBIT
Correct Answer: B. Variant perception: an analytical view that differs materially from prevailing market expectations and can create an
investment opportunity if correct; 10-Q: a public company's quarterly SEC filing containing interim financial statements and updates
Explanation: Variant perception means an analytical view that differs materially from prevailing market expectations and can create an
investment opportunity if correct, whereas 10-Q means a public company's quarterly SEC filing containing interim financial statements and
updates. The correct choice keeps the two concepts separate and assigns each description to the proper term. The distractors either reverse the
concepts or substitute a feature belonging to another topic. That distinction matters because the two terms can lead to different regulatory,
economic, or operational consequences.
Question 14. A research analyst is reviewing a situation described as follows: a measure of the resources available to meet interest
expense, commonly EBIT or EBITDA divided by interest expense. Which concept is most directly involved?
A. Dividend payout ratio
B. Defensive industry
C. Interest coverage
D. Market risk premium
Correct Answer: C. Interest coverage
Explanation: Interest coverage is the best answer because it is a measure of the resources available to meet interest expense, commonly EBIT
or EBITDA divided by interest expense. The scenario gives the research analyst facts that point directly to that concept. The other choices can
arise in related securities situations but do not fit the specific description provided. Applying the precise definition to the facts is the best way to
resolve this type of scenario.
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