Chartered Financial Analyst (CFA) Level I
Questions And Correct Answers (Verified
Answers) Plus Rationales 2026 Q&A | Instant
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1. Which of the following best describes the primary objective of the
CFA Institute Code of Ethics?
A. Maximize member compensation
B. Promote integrity and professionalism in capital markets
C. Ensure compliance with local regulations only
D. Encourage competition among investment professionals
Answer: B
The Code of Ethics focuses on integrity, professionalism, and public
trust in capital markets.
2. Which quantitative method is most appropriate for analyzing the
relationship between one dependent variable and one
independent variable?
A. Multiple regression
B. Simple linear regression
C. Time-series analysis
D. Simulation
Answer: B
Simple linear regression examines the relationship between a
single dependent and a single independent variable.
,3. A population parameter is best described as:
A. A sample statistic
B. A numerical value describing a sample
C. A numerical value describing a population
D. A forecasted estimate
Answer: C
Parameters describe entire populations, while statistics describe
samples.
4. Which measure of central tendency is most affected by extreme
values?
A. Median
B. Mode
C. Arithmetic mean
D. Geometric mean
Answer: C
The arithmetic mean is sensitive to outliers.
5. The time value of money principle states that:
A. Money has constant purchasing power
B. A dollar today is worth more than a dollar in the future
C. Inflation has no impact on cash flows
D. Interest rates are always positive
Answer: B
Receiving money sooner allows reinvestment and reduces
uncertainty.
6. Which financial statement shows a firm’s financial position at a
specific point in time?
A. Income statement
, B. Statement of cash flows
C. Balance sheet
D. Statement of changes in equity
Answer: C
The balance sheet reports assets, liabilities, and equity at a specific
date.
7. Under IFRS, which inventory valuation method is prohibited?
A. FIFO
B. Weighted average
C. LIFO
D. Specific identification
Answer: C
IFRS does not permit the use of LIFO.
8. Gross profit is calculated as:
A. Revenue minus operating expenses
B. Revenue minus cost of goods sold
C. Net income plus taxes
D. Operating income minus interest
Answer: B
Gross profit reflects profitability after direct production costs.
9. Which ratio best measures short-term liquidity?
A. Debt-to-equity
B. Return on equity
C. Current ratio
D. Gross margin
Answer: C
The current ratio compares current assets to current liabilities.
Questions And Correct Answers (Verified
Answers) Plus Rationales 2026 Q&A | Instant
Download Pdf
1. Which of the following best describes the primary objective of the
CFA Institute Code of Ethics?
A. Maximize member compensation
B. Promote integrity and professionalism in capital markets
C. Ensure compliance with local regulations only
D. Encourage competition among investment professionals
Answer: B
The Code of Ethics focuses on integrity, professionalism, and public
trust in capital markets.
2. Which quantitative method is most appropriate for analyzing the
relationship between one dependent variable and one
independent variable?
A. Multiple regression
B. Simple linear regression
C. Time-series analysis
D. Simulation
Answer: B
Simple linear regression examines the relationship between a
single dependent and a single independent variable.
,3. A population parameter is best described as:
A. A sample statistic
B. A numerical value describing a sample
C. A numerical value describing a population
D. A forecasted estimate
Answer: C
Parameters describe entire populations, while statistics describe
samples.
4. Which measure of central tendency is most affected by extreme
values?
A. Median
B. Mode
C. Arithmetic mean
D. Geometric mean
Answer: C
The arithmetic mean is sensitive to outliers.
5. The time value of money principle states that:
A. Money has constant purchasing power
B. A dollar today is worth more than a dollar in the future
C. Inflation has no impact on cash flows
D. Interest rates are always positive
Answer: B
Receiving money sooner allows reinvestment and reduces
uncertainty.
6. Which financial statement shows a firm’s financial position at a
specific point in time?
A. Income statement
, B. Statement of cash flows
C. Balance sheet
D. Statement of changes in equity
Answer: C
The balance sheet reports assets, liabilities, and equity at a specific
date.
7. Under IFRS, which inventory valuation method is prohibited?
A. FIFO
B. Weighted average
C. LIFO
D. Specific identification
Answer: C
IFRS does not permit the use of LIFO.
8. Gross profit is calculated as:
A. Revenue minus operating expenses
B. Revenue minus cost of goods sold
C. Net income plus taxes
D. Operating income minus interest
Answer: B
Gross profit reflects profitability after direct production costs.
9. Which ratio best measures short-term liquidity?
A. Debt-to-equity
B. Return on equity
C. Current ratio
D. Gross margin
Answer: C
The current ratio compares current assets to current liabilities.
