CFA GLOSSARY STUDY
QUESTIONS AND
CORRECT ANSWERS
GRADED A+ 2025-2026
A priori probability - ANS-A probability based on logical analysis rather than on
observation or personal judgment.
Abandonment option - ANS-The ability to terminate a project at some future time if
the financial results are disappointing.
Abnormal return - ANS-The amount by which a security's actual return differs from its
expected return, given the security's risk and the market's return.
Absolute advantage - ANS-A country's ability to produce a good or service at a lower
absolute cost than its trading partner.
Absolute dispersion - ANS-The amount of variability present without comparison to
any reference point or benchmark.
Absolute frequency - ANS-The number of observations in a given interval (for grouped
data).
Accelerated book build - ANS-An offering of securities by an investment bank acting as
principal that is accomplished in only one or two days.
, Accelerated methods of depreciation - ANS-Depreciation methods that allocate a
relatively large proportion of the cost of an asset to the early years of the asset's useful
life.
Account - ANS-With the accounting systems, a formal record of increases and
decreases in a specific asset, liability component of owners' equity, revenue, or
expense.
Account format - ANS-A method of presentation of accounting transactions in which
effects on assets appear at the left and effects on liabilities and equity appear at the
right of a central dividing line; also known as T-account format.
Accounting (or explicit) costs - ANS-Payments to non-owner parties for services or
resources they supply to the firm.
Accounting loss - ANS-When accounting profit is negative.
Accounting profit (income before taxes or pretax income) - ANS-Income as reported on
the income statement, in accordance with prevailing accounting standards, before the
provisions for income tax expense.
Accounting risk - ANS-The risk associated with accounting standards that vary from
country to country or with any uncertainty about how certain transactions should be
recorded.
Accounts payable (trade payables) - ANS-Amounts that a business owes to its vendors
for oods and services that were purchased from them but which have not yet been
payed.
Accounts receivable turnover - ANS-Ratio of sales on credit to the average balance in
accounts receivable.
Accrual basis - ANS-Method of accounting in which the effect of transactions on
financial condition and income are recorded when they occur, not when they are
settled in cash.
QUESTIONS AND
CORRECT ANSWERS
GRADED A+ 2025-2026
A priori probability - ANS-A probability based on logical analysis rather than on
observation or personal judgment.
Abandonment option - ANS-The ability to terminate a project at some future time if
the financial results are disappointing.
Abnormal return - ANS-The amount by which a security's actual return differs from its
expected return, given the security's risk and the market's return.
Absolute advantage - ANS-A country's ability to produce a good or service at a lower
absolute cost than its trading partner.
Absolute dispersion - ANS-The amount of variability present without comparison to
any reference point or benchmark.
Absolute frequency - ANS-The number of observations in a given interval (for grouped
data).
Accelerated book build - ANS-An offering of securities by an investment bank acting as
principal that is accomplished in only one or two days.
, Accelerated methods of depreciation - ANS-Depreciation methods that allocate a
relatively large proportion of the cost of an asset to the early years of the asset's useful
life.
Account - ANS-With the accounting systems, a formal record of increases and
decreases in a specific asset, liability component of owners' equity, revenue, or
expense.
Account format - ANS-A method of presentation of accounting transactions in which
effects on assets appear at the left and effects on liabilities and equity appear at the
right of a central dividing line; also known as T-account format.
Accounting (or explicit) costs - ANS-Payments to non-owner parties for services or
resources they supply to the firm.
Accounting loss - ANS-When accounting profit is negative.
Accounting profit (income before taxes or pretax income) - ANS-Income as reported on
the income statement, in accordance with prevailing accounting standards, before the
provisions for income tax expense.
Accounting risk - ANS-The risk associated with accounting standards that vary from
country to country or with any uncertainty about how certain transactions should be
recorded.
Accounts payable (trade payables) - ANS-Amounts that a business owes to its vendors
for oods and services that were purchased from them but which have not yet been
payed.
Accounts receivable turnover - ANS-Ratio of sales on credit to the average balance in
accounts receivable.
Accrual basis - ANS-Method of accounting in which the effect of transactions on
financial condition and income are recorded when they occur, not when they are
settled in cash.
