Ohio Chartered Financial Analyst Exam
Practice Questions And Correct Answers
(Verified Answers) Plus Rationales
2025|2026 Q&A | Instant Download Pdf
1. Which financial statement provides information about a company’s
profitability over a specific period?
a) Balance Sheet
b) Cash Flow Statement
c) Income Statement
d) Statement of Retained Earnings
The income statement reports revenues and expenses to show
profitability during a period.
2. Which ratio best measures a company’s ability to meet short-term
obligations?
a) Debt-to-Equity Ratio
b) Current Ratio
, c) Return on Equity
d) Net Profit Margin
The current ratio (current assets ÷ current liabilities) shows short-term
liquidity strength.
3. A portfolio with a beta greater than 1 is expected to:
a) Move less than the market
b) Be risk-free
c) Move more than the market
d) Remain unaffected by the market
Beta > 1 means the asset is more volatile than the overall market.
4. Which valuation method is most commonly used to value a stock
based on expected future cash flows?
a) Book Value Method
b) Comparable Company Analysis
c) Discounted Cash Flow (DCF) Analysis
d) Dividend Yield
DCF discounts future cash flows to determine intrinsic value.
5. If the Federal Reserve increases interest rates, bond prices generally:
a) Increase
b) Decrease
c) Remain unchanged
d) Rise sharply
Bond prices move inversely with interest rates.
,6. Which financial ratio measures profitability relative to shareholder
equity?
a) Gross Margin
b) Net Profit Margin
c) Return on Equity (ROE)
d) Current Ratio
ROE = Net Income ÷ Shareholder Equity, measuring returns to equity
holders.
7. In efficient market hypothesis (EMH), the strong form asserts that:
a) Prices reflect only past information
b) Prices reflect public information only
c) Prices do not reflect insider information
d) Prices reflect all public and private information
The strong form assumes all information, even insider, is priced in.
8. Duration in bond analysis measures:
a) Yield volatility
b) Sensitivity of bond price to interest rate changes
c) Credit risk
d) Coupon frequency
Duration estimates how much a bond’s price will change with interest
rates.
9. A company with high fixed costs and low variable costs will have:
a) Low operating leverage
, b) High operating leverage
c) No leverage
d) Negative leverage
High fixed costs amplify the effect of sales changes on operating profit.
10. Which of the following is a leading economic indicator?
a) Unemployment Rate
b) Consumer Price Index
c) Corporate Profits
d) Stock Market Returns
Stock prices tend to move ahead of the overall economy, making them
leading indicators.
11. Which of the following is an example of systematic risk?
a) A factory strike
b) A company lawsuit
c) A global recession
d) Product recall
Systematic risk affects the entire market and cannot be diversified
away.
12. The efficient frontier in portfolio theory represents:
a) Portfolios with the lowest returns
b) Portfolios with the least diversification
c) Portfolios offering the maximum return for a given level of risk
d) Portfolios that are risk-free
Practice Questions And Correct Answers
(Verified Answers) Plus Rationales
2025|2026 Q&A | Instant Download Pdf
1. Which financial statement provides information about a company’s
profitability over a specific period?
a) Balance Sheet
b) Cash Flow Statement
c) Income Statement
d) Statement of Retained Earnings
The income statement reports revenues and expenses to show
profitability during a period.
2. Which ratio best measures a company’s ability to meet short-term
obligations?
a) Debt-to-Equity Ratio
b) Current Ratio
, c) Return on Equity
d) Net Profit Margin
The current ratio (current assets ÷ current liabilities) shows short-term
liquidity strength.
3. A portfolio with a beta greater than 1 is expected to:
a) Move less than the market
b) Be risk-free
c) Move more than the market
d) Remain unaffected by the market
Beta > 1 means the asset is more volatile than the overall market.
4. Which valuation method is most commonly used to value a stock
based on expected future cash flows?
a) Book Value Method
b) Comparable Company Analysis
c) Discounted Cash Flow (DCF) Analysis
d) Dividend Yield
DCF discounts future cash flows to determine intrinsic value.
5. If the Federal Reserve increases interest rates, bond prices generally:
a) Increase
b) Decrease
c) Remain unchanged
d) Rise sharply
Bond prices move inversely with interest rates.
,6. Which financial ratio measures profitability relative to shareholder
equity?
a) Gross Margin
b) Net Profit Margin
c) Return on Equity (ROE)
d) Current Ratio
ROE = Net Income ÷ Shareholder Equity, measuring returns to equity
holders.
7. In efficient market hypothesis (EMH), the strong form asserts that:
a) Prices reflect only past information
b) Prices reflect public information only
c) Prices do not reflect insider information
d) Prices reflect all public and private information
The strong form assumes all information, even insider, is priced in.
8. Duration in bond analysis measures:
a) Yield volatility
b) Sensitivity of bond price to interest rate changes
c) Credit risk
d) Coupon frequency
Duration estimates how much a bond’s price will change with interest
rates.
9. A company with high fixed costs and low variable costs will have:
a) Low operating leverage
, b) High operating leverage
c) No leverage
d) Negative leverage
High fixed costs amplify the effect of sales changes on operating profit.
10. Which of the following is a leading economic indicator?
a) Unemployment Rate
b) Consumer Price Index
c) Corporate Profits
d) Stock Market Returns
Stock prices tend to move ahead of the overall economy, making them
leading indicators.
11. Which of the following is an example of systematic risk?
a) A factory strike
b) A company lawsuit
c) A global recession
d) Product recall
Systematic risk affects the entire market and cannot be diversified
away.
12. The efficient frontier in portfolio theory represents:
a) Portfolios with the lowest returns
b) Portfolios with the least diversification
c) Portfolios offering the maximum return for a given level of risk
d) Portfolios that are risk-free
