WALL STREET PREP LATEST 2026 EXAM QUESTIONS
AND ANSWERS MARKED A+
✔✔Increases in A/R, inventory, prepaid expenses, other current assets should be
_____________ net income to get to CFO - ✔✔subtracted
✔✔increases in A/P, accrued expenses, other current liabilities should be
____________ net income to get to CFO - ✔✔added
✔✔gains on sale of assets - ✔✔subtracted from CFO
✔✔stock based compensation - ✔✔added to CFO
✔✔Common CFI inflows/outflows - ✔✔- capital expenditures
- purchases of intangible assets
+ asset sales
+ sales of debt/ equity security
- purchases of debt/equity security
✔✔Common CFS inflows/outflows - ✔✔-Issuance / repayment of debt (cash inflow /
outflow)
-Common stock issued / repurchased (cash inflow / outflow)
-Payment of common & preferred dividends (cash outflow)
✔✔Assumptions of Accounting - ✔✔accounting entity, going concern, measurement,
periodicity
✔✔principles of accounting - ✔✔1. Historical Cost
2. Revenue Recognition
3. Matching Principle
4. Full Disclosure
✔✔constraints of accounting - ✔✔1. Estimates and judgements
2. materiality
3. consistency
4. conservatism
✔✔Form 10-K - ✔✔Publicly traded companies must file a report at the end of every
fiscal year which includes a thorough overview of their businesses and finances as well
as financial statements
✔✔Form 10-Q - ✔✔At the end of each quarter of the fiscal year (for the first three
quarters) publicly traded companies file a report with the SEC including financial
statements and non-financial data
, ✔✔Form 8-Q - ✔✔Required filing any time a company undergoes or announces a
materially significant event such as an earnings press release, an acquisition, disposal
of assets, bankruptcy, etc.
✔✔Form 14A - ✔✔Required filing prior to company's annual shareholder meetings
✔✔S-1 Registration - ✔✔IPO
✔✔The only parts of a financial statement that a financial analyst will need to pay
attention to: - ✔✔oPart 1, item 1. Business
oPart 2, item 6. Selected financial data
oPart 2, item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation
oPart 2, item 8. Financial statements and supplementary data
✔✔Revenue - ✔✔Represents proceeds from the sale of goods and services produced
or offered by a company
✔✔Revenue Recognition: Multiple Deliverables - ✔✔For sales of bundled products,
companies should assign individual values to each of the bundled components
✔✔Revenue Recognition: Long-term projects - ✔✔1. Percentage Completion Method
2. Completed Contract Method
✔✔Percentage Completion Method - ✔✔revenues are recognized on the basis of the
percentage of total work completed during the accounting period
✔✔Completed Contract Method - ✔✔allows revenue recognition only once the entire
project has been completed (rarely used in the US)
✔✔COGS - ✔✔Represents company's direct cost of manufacture or procurement of a
good or service for a company to sell to generate revenue
✔✔Examples of COGS - ✔✔Merchandise inventory
Manufactured goods inventory
•Raw material costs
•Direct labor costs
•Factory overhead
Shipping and delivery costs
Any other costs associated with the generation of revenue
Depreciation of fixed assets
✔✔Gross Profit = ________ - ___________ - ✔✔Net revenue, COGS
AND ANSWERS MARKED A+
✔✔Increases in A/R, inventory, prepaid expenses, other current assets should be
_____________ net income to get to CFO - ✔✔subtracted
✔✔increases in A/P, accrued expenses, other current liabilities should be
____________ net income to get to CFO - ✔✔added
✔✔gains on sale of assets - ✔✔subtracted from CFO
✔✔stock based compensation - ✔✔added to CFO
✔✔Common CFI inflows/outflows - ✔✔- capital expenditures
- purchases of intangible assets
+ asset sales
+ sales of debt/ equity security
- purchases of debt/equity security
✔✔Common CFS inflows/outflows - ✔✔-Issuance / repayment of debt (cash inflow /
outflow)
-Common stock issued / repurchased (cash inflow / outflow)
-Payment of common & preferred dividends (cash outflow)
✔✔Assumptions of Accounting - ✔✔accounting entity, going concern, measurement,
periodicity
✔✔principles of accounting - ✔✔1. Historical Cost
2. Revenue Recognition
3. Matching Principle
4. Full Disclosure
✔✔constraints of accounting - ✔✔1. Estimates and judgements
2. materiality
3. consistency
4. conservatism
✔✔Form 10-K - ✔✔Publicly traded companies must file a report at the end of every
fiscal year which includes a thorough overview of their businesses and finances as well
as financial statements
✔✔Form 10-Q - ✔✔At the end of each quarter of the fiscal year (for the first three
quarters) publicly traded companies file a report with the SEC including financial
statements and non-financial data
, ✔✔Form 8-Q - ✔✔Required filing any time a company undergoes or announces a
materially significant event such as an earnings press release, an acquisition, disposal
of assets, bankruptcy, etc.
✔✔Form 14A - ✔✔Required filing prior to company's annual shareholder meetings
✔✔S-1 Registration - ✔✔IPO
✔✔The only parts of a financial statement that a financial analyst will need to pay
attention to: - ✔✔oPart 1, item 1. Business
oPart 2, item 6. Selected financial data
oPart 2, item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation
oPart 2, item 8. Financial statements and supplementary data
✔✔Revenue - ✔✔Represents proceeds from the sale of goods and services produced
or offered by a company
✔✔Revenue Recognition: Multiple Deliverables - ✔✔For sales of bundled products,
companies should assign individual values to each of the bundled components
✔✔Revenue Recognition: Long-term projects - ✔✔1. Percentage Completion Method
2. Completed Contract Method
✔✔Percentage Completion Method - ✔✔revenues are recognized on the basis of the
percentage of total work completed during the accounting period
✔✔Completed Contract Method - ✔✔allows revenue recognition only once the entire
project has been completed (rarely used in the US)
✔✔COGS - ✔✔Represents company's direct cost of manufacture or procurement of a
good or service for a company to sell to generate revenue
✔✔Examples of COGS - ✔✔Merchandise inventory
Manufactured goods inventory
•Raw material costs
•Direct labor costs
•Factory overhead
Shipping and delivery costs
Any other costs associated with the generation of revenue
Depreciation of fixed assets
✔✔Gross Profit = ________ - ___________ - ✔✔Net revenue, COGS
