A reader of our's have emailed me to post the CFA Exam that I took last February 23. I have already posted the answers and principles of the wrong answers I had. Now I am posting the whole exam. I encourage everyone to try and answer the said self-assessment test. Have fun...
You can send your answers at the comments section of the blog... Good Luck!
The CFA Program is postgraduate. The readings assigned in the study program and the questions on
the CFA examinations are geared for individuals who are prepared to deal with “masters”-level
coursework. Although many candidates enter the program with a business school education, others
may have a liberal arts background. No prerequisite courses of study are specified for entering the
CFA Program, but candidates should be aware that the assigned readings in many topic areas are
beyond a basic, introductory level.
The Level I Financial Statement Analysis material is directed at an intermediate/advanced level of
understanding. Before entering the CFA Program, candidates should be familiar with financial
accounting methods and financial statements. Candidates without a strong accounting background
or who need to refresh their accounting knowledge should review an intermediate financial
accounting textbook or enroll in a local university financial accounting course.
The Level I Economic Analysis material is also directed at an intermediate level of understanding.
Before entering the program, candidates already should be familiar with the principles of
macroeconomics, microeconomics, and the monetary system. If candidates do not have this
educational background or they wish to refresh their understanding of this material, a review of an
introductory level textbook or enrollment in a local university economics survey course is
appropriate.
The Level I curriculum in general assumes a basic understanding of financial markets and
instruments. Before entering the program, candidates should be familiar with the basic
characteristics of equity and fixed income markets and securities. Candidates without that
familiarity should review an introductory level textbook that addresses financial markets and
instruments.
The self-assessment test is designed to help candidates determine their need to review pre-CFA
materials. An answer key is provided at the end of the test. Candidates scoring less than 70 percent
correct in any one topic area should commit to additional study time preparing for that area prior to
or in conjunction with the CFA study program.
CFA Candidate Self-Assessment Test
Questions
FINANCIAL STATEMENT ANALYSIS: 30 Questions
Note to candidates: Questions 1 through 30 are based on U.S. generally accepted accounting
principles (GAAP) unless otherwise noted.
1. Accrual accounting techniques are used to:
A. assign revenues and expenses to the appropriate accounting period.
B. record the anticipated effects of actions that may occur at a future date.
C. report the results of actions whose monetary effects are difficult to estimate.
D. allocate nonoperating revenues and expenses to the appropriate business unit.
2. Which of the following is NOT considered an asset?
A. Inventory
B. Trademarks
C. Retained earnings
D. Accounts receivable
Use the information in the following table to answer Questions 3 and 4.
Black Company
Balance Sheet
December 31, 200X
Assets
Cash $100,000
Short-term investments 50,000
Accounts and notes receivable 130,000
Inventory 140,000
Land 170,000
Building $200,000
less accumulated depreciation (40,000) 160,000
Trademarks 110,000
Total Assets $860,000
Liabilities
Notes payable (due in 3 months) $80,000
Accounts payable 40,000
Accrued salaries payable 10,000
Mortgage payable (due in 8 years) 180,000
Total Liabilities $310,000
Stockholders’ Equity
Common stock $500,000
Retained earnings 50,000
Total Stockholder's Equity $550,000
Total Liabilities and Stockholders’ Equity $860,000
3. The total amount of Black Company’s assets to be classified as current assets is:
A. $150,000.
B. $280,000.
C. $420,000.
D. $590,000.
4. The net amount of Black Company’s earnings that has been reinvested in the company since the company’s inception is closest to:
A. $50,000.
B. $100,000.
C. $500,000.
D. $550,000.
5. When accounting for merchandising businesses, gross margin equals the difference between:
A. net sales and cost of goods sold.
B. net sales and operating expenses.
C. gross sales and the sum of returns and allowances.
D. net sales and the sum of cost of goods sold and operating expenses.
6. Which of the following would NOT contribute to the difference between gross sales and net sales?
A. Cash refunds for returned products.
B. Discounts from listed prices for delayed shipping.
C. Allowances off selling prices for defective products.
D. Sales made on credit rather than for immediate payment.
7. Classifying an investment as short-term or long-term depends primarily on:
A. the dollar amount of the investment.
B. the length of time the investor has held the investment.
C. whether a liquid market exists for selling the investment.
D. the length of time the investor expects to hold the investment.
8. Under the allowance method for accounting for uncollectible accounts:
A. losses from bad debts are recognized when defaults occur.
B. estimated losses from potentially uncollectible debt are amortized over the life of the obligation.
C. loans to high-risk borrowers are recorded at a discount relative to their stated principal amounts.
D. losses from bad debts are estimated for the same period in which the corresponding credit sales occur.
9. A company’s cost of inventory purchases was $250,000 during the year, its ending inventory was $80,000, and its beginning inventory was $100,000. The company’s cost of goods sold was closest to:
A. $170,000.
B. $270,000.
C. $330,000.
D. $370,000.
10. Inventory valuation methods rely primarily on assumptions about the flow of:
A. costs.
B. values.
C. money.
D. resale prices.
11. For a company with new fixed assets, which of the following combinations of accounting practices will most likely lead to the highest reported earnings in an inflationary environment?
Depreciation Method Inventory Method
A. Straight-line First in, first out (FIFO)
D. Straight-line Last in, first out (LIFO)
B. Double-declining-balance First in, first out (FIFO)
C. Double-declining-balance Last in, first out (LIFO)
12. In a period of rising prices, which of the following inventory methods generally results in the lowest reported net income?
A. FIFO method.
B. LIFO method.
C. Average-cost method.
D. Specific-identification method.
13. In a period of rising prices and stable inventory quantities, compared to a company that uses the FIFO inventory valuation method, a company using LIFO is likely to have higher:
A. inventory.
B. income taxes.
C. current assets.
D. cost of goods sold.
14. If a company’s ending inventory is understated by $3,000 and beginning inventory is overstated by $5,000, the company’s operating income will most likely be:
A. overstated by $2,000.
B. overstated by $8,000.
C. understated by $2,000.
D. understated by $8,000.
15. When applying the lower-of-cost-or-market rule to inventory, market generally refers to:
A. resale value.
B. original cost.
C. current replacement cost.
D. original cost less physical deterioration.
16. A company bought a truck on January 1 for $30,000. The truck has a five-year estimated useful life and a $5,000 residual value. Under the straight-line depreciation method, the asset’s carrying value for financial reporting purposes after two years is closest to:
A. $16,000.
B. $18,000.
C. $20,000.
D. $21,000.
17. For purposes of determining the amount of a capital expenditure, the acquisition cost of equipment would NOT include:
A. transportation cost.
B. insurance cost during transit.
C. cost of testing equipment during installation.
D. repair cost of damage incurred during installation.
18. Depreciation differs from other types of expenses in that depreciation:
A. can be measured more precisely.
B. does not require an immediate cash outlay.
C. is not deductible if it would result in a net loss.
D. can be avoided if the company acquires used assets.
19. If a company issued bonds at a discount, the discount is amortized over the life of the bonds and:
A. decreases the periodic interest payment below the interest expense charged.
B. increases the periodic interest expense charged above the interest payment made.
C. increases the periodic interest payment made above the interest expense charged.
D. decreases the periodic interest expense charged below the interest payment made.
20. On a company’s balance sheet, which of the following would NOT be listed as contributed capital?
A. Common stock
B. Preferred stock
C. Retained earnings
D. Paid-in-capital in excess of par value
21. Which of the following accurately describes the effects of a purchase of treasury stock on a company’s assets and stockholders’ equity?
Assets Stockholders’ Equity
A. Decreased Decreased
B. Decreased Unchanged
C. Unchanged Decreased
D. Unchanged Unchanged
22. If a corporation declares and pays a dividend, this transaction will:
A. increase liabilities.
B. decrease net income.
C. not affect total assets.
D. reduce stockholders’ equity.
23. A company’s assets and stockholders’ equity are most likely to be reduced by:
A. stock splits.
B. cash dividends.
C. stock dividends.
D. reverse stock splits.
24. The financial results from a discontinued operation should be reflected on a company’s financial statements by:
A. discussing the effects in a footnote.
B. adjusting the company’s reported costs.
C. adjusting the company’s reported net revenue.
D. reporting the effects separately on the income statement.
Questions 25 through 27 should be answered in the context of a statement of cash flows and using the following data for a company:
Cash payments for interest $ 12
Retirement of common stock 32
Cash payments to merchandise suppliers 85
Purchase of land 8
Sale of equipment 30
Payment of dividends 37
Cash payment for salaries 35
Cash collection from customers 260
Purchase of equipment 40
25. The company’s cash flows from operating activities are closest to:
A. $91.
B. $128.
C. $140.
D. $175.
26. The company’s cash flows from investing activities are closest to:
A. –$67.
B. –$48.
C. –$18.
D. –$10.
27. The company’s cash flows from financing activities are closest to:
A. –$81.
B. –$69.
C. –$49.
D. –$37.
28. Which of the following is NOT an accurate statement of the balance sheet equation?
A. Assets – Liabilities = Owners’ Equity.
B. Assets – Owners’ Equity = Liabilities.
C. Assets = Liabilities + Owners’ Equity.
D. Assets = Liabilities – Owners’ Equity.
29. Which of the following financial statements presents information about a business at a point in time?
A. Balance sheet
B. Income statement
C. Statement of cash flows
D. Statement of retained earnings
30. The responsibilities of the auditor of a company’s financial statements do NOT include a requirement to:
A. confirm assets and liabilities.
B. examine the company’s internal control systems.
C. verify that the financial statements are free from any any error.
D. agree that management’s choice of accounting principles is appropriate.
ECONOMICS: 30 Questions
31. When comparing gross national product (GNP) and gross domestic product (GDP), GDP is most likely to exclude:
A. net exports.
B. foreign security transactions.
C. income earned by citizens abroad.
D. payments for national income taxes.
32. Using the expenditure approach, gross domestic product includes gross:
A. income taxes paid.
B. salaries and wages paid.
C. imports from foreigners.
D. private domestic investment.
33. An analyst, calculating the gross domestic product for an economy, is most likely to include:
A. sales of services.
B. financial transactions.
C. sales of intermediate goods.
D. government transfer payments.
34. The presence of a surplus of a good in a market is most likely to result in a(n):
A. decrease in supply.
B. decrease in demand.
C. increase in supply elasticity.
D. increase in quantity demanded.
35. An analyst interested in understanding movements in the general level of prices throughout the economy is most likely to use the:
A. consumer price index (CPI).
B. gross domestic product (GDP) deflator.
C. weighted average of the CPI and the GDP deflator.
D. correlation coefficient between the CPI and the GDP deflator.
36. Which of the following is a limitation of GDP as a measure of aggregate economic activity? GDP excludes:
A. imports to foreigners.
B. production of household services.
C. governmental consumption of goods.
D. private investment in depreciable assets.
37. Which of the following statements about phases of the business cycle is most accurate?
A. During an expansion, real output grows and unemployment increases.
B. During contraction, real output declines and unemployment decreases.
C. The business peak is the highest output (measured in GDP) of an expansion.
D. The recessionary trough measures deviations of real GDP from the trend line.
38. An analyst calculating the unemployed rate is most likely to classify as unemployed persons who are:
A. retired.
B. not looking for work.
C. temporarily laid off from a job.
D. working in their own households.
39. Frictional unemployment results from:
A. inflexible wages in the marketplace.
B. recessionary business conditions and inadequate aggregate demand for labor.
C. structural characteristics of the economy that create difficulties for job seekers in finding employment and for employers in hiring workers.
D. constant changes in the economy that prevent qualified unemployed workers from being immediately matched up with existing job openings.
40. To be useful, a measure of inflation for an economy would most likely reflect information about the change in prices of:
A. goods only.
B. goods and services only.
C. goods, services, and financial assets only.
D. goods, services, financial assets, and real assets.
41. If the consumer price index is 252 this year compared with 240 last year, the rate of inflation for the year is closest to:
A. 4.76%.
B. 4.88%.
C. 5.00%.
D. 12.00%.
42. A period when an economy is experiencing substantial inflation and either a declining or slow rate of growth in output is called:
A. deflation.
B. stagflation.
C. depression.
D. contraction.
43. Which of the following is NOT a source of adverse effects of inflation on an economy? Inflation:
A. distorts the information delivered by prices.
B. affects product prices without changing underlying resource prices, such as wages, in the long run.
C. increases the uncertainty accompanying investment and other activities involving future payments.
D. causes wasted resources as individuals attempt to prevent the erosion of their income and wealth as a result of the inflation.
44. Aggregate demand is least likely to increase as a result of a(n):
A. increase in real wealth.
B. decrease in the real rate of interest.
C. increase in the expected rate of inflation.
D. increase in the exchange rate value of the nation’s currency.
45. Which of the following factors will decrease long-run aggregate supply?
A. Supply shocks.
B. A reduction in the supply of resources.
C. An improvement in technology and productivity.
D. Intensified competition in markets for goods and services.
46. Which of the following factors is least likely to play a role in the self-correcting mechanisms that help stabilize the economy? The pattern of:
A. price adjustments in resource markets.
B. changes in employment levels in labor markets.
C. interest rate adjustments in loanable funds markets.
D. changes in consumption in response to fluctuations in income.
47. The views of the classical economists and the Keynesian model differ with respect to the:
A. amount of flexibility in wages and prices.
B. level of the natural rate of unemployment.
C. appropriate definition of the money supply.
D. determinants of the long-run aggregate supply curve.
48. Which of the following conditions is present when macroeconomic equilibrium is achieved in the Keynesian model?
A. Autonomous expenditures are zero.
B. Planned imports and planned exports are equal.
C. Government spending levels and taxes are equal.
D. Planned expenditures and current output are equal.
49. An analyst has gathered the following consumption information:
Income Current Consumption
$20,000 $19,000
24,000 22,000
The marginal propensity to consume (MPC) is closest to:
A. 0.50.
B. 0.75.
C. 0.86.
D. 1.33.
50. According to the Keynesian model, if the marginal propensity to consume is 0.8, an independent increase in investment expenditures of $10 billion is most likely to lead to an increase in the equilibrium level of aggregate income of:
A. $8 billion.
B. $12.5 billion.
C. $50 billion.
D. $80 billion.
51. The law of demand states that an:
A. increase in price can be expected as consumers demand more units of a product.
B. inverse relationship exists between the price and the amount of a good purchased.
C. increase in price will result from an increase in demand for a good in scarce supply.
D. increase in the quantity of a good available will occur when the price of the good increases.
52. The law of supply states that:
A. a direct relationship exists between the price of a good and the amount supplied.
B. suppliers provide more of a good as the price of the resources needed to produce the good rises.
C. an inverse relationship exists between the price of a good and the amount purchased by suppliers.
D. an inverse relationship exists between the price of a good and the amount that buyers choose to purchase.
53. The price elasticity of demand for a commodity is determined primarily by the:
A. incomes of consumers.
B. size of the consumer surplus.
C. availability of complementary goods.
D. availability of substitutes for the goods.
54. In comparing the short-run and long-run responses of purchases to an unexpected increase in price, responses are typically:
A. larger in the short run than in the long run.
B. smaller in the short run than in the long run.
C. approximately the same in the short run as in the long run.
D. dependent, with respect to magnitude, on the level of competition in the market.
55. The demand for a good is least likely to decrease as the result of a:
A. fall in consumer income.
B. rise in the expected future price of the good.
C. fall in the number of consumers in the market.
D. rise in the price of a complementary good often used with the original good.
56. The supply of a good is least likely to increase as the result of:
A. favorable weather.
B. fall in the price of a resource used in producing the good.
C. an increase in the taxes imposed on the producers of the good.
D. a technological change allowing cheaper production of the good.
57. A shift in the demand curve for a good is least likely to result from:
A.increased price for the good.
B. increased incomes of buyers.
C.increased price of a substitute good.
D. decreased price of a complementary good.
58. Which of the following conditions is required for equilibrium in a market?
A. Producer surplus is minimized.
B. No restrictions exist on the movement of a good.
C. The quantity demanded must equal the quantity supplied.
D. The producer’s opportunity cost must equal the market price.
59. Which of the following conditions must be met to achieve economic efficiency?
A. All activities that produce more benefits than costs for the individuals within an economy are undertaken.
B. A large number of sellers exist that supply differentiated products to a market with low barriers to entry.
C. A small number of sellers exist that supply products at prices that reflect savings from economies of scale.
D. A large number of small companies exist producing an identical product in an industry that has complete freedom of entry and exit.
60. Which of the following factors is least likely to provide a valid basis for government action to improve the performance of markets?
A. Externalities
B. Public goods
C. Excessive competition among sellers
D. Incomplete information for market participants
MARKETS AND INSTRUMENTS: 5 Questions
61. The call feature associated with a corporate bond determines the:
A. date on which bondholders can request that their funds be repaid.
B. terms under which the borrowing company can redeem the bond prior to maturity.
C. conditions under which bondholders can request that the company add to its financial reserves.
D. requirements for the borrowing company to notify bondholders about material changes in its financial condition.
62. The seniority of a bond refers to the:
A. time remaining until the bond matures.
B. average age of the assets securing the bond.
C. time that has passed since the bond was issued.
D. priority of the bond’s claim on the company’s assets.
63. Yankee bonds are fixed-income securities that are issued:
A. in the US by non-US borrowers, paying interest in US dollars.
B. in the US by non-US borrowers, paying interest in a non-dollar currency.
C. outside the US by US borrowers, paying interest in US dollars.
D. outside the US by US borrowers, paying interest in a non-dollar currency.
64. Futures contracts provide for the:
A. optional delivery of an asset at a specified future date for a specified payment.
B. mandatory delivery of an asset at a specified future date for a specified payment.
C. optional delivery of an asset at a specified future date for a payment to be determined at the future date.
D. mandatory delivery of an asset at a specified future date for a payment to be determined at the future date.
65. A real estate investment trust provides a means for investing in:
A. a portfolio of real estate assets.
B. the non-US real estate assets of US companies.
C. the cash flows generated by rental payments on commercial property.
D. a portfolio of shares in companies that develop or own real estate assets.
Choose to be Rich Workbook
022808
Kiyosaki espouses that we must have a clear monthly record of all our financial concerns and whereabouts. The data I have presented here are rough drafts... Next month it will be more specific since I will start my record keeping...
Record Keeping
Personal Info
Name: RONALDO GUERRERO BORJA Date: February 28, 2008
Name: RONALDO GUERRERO BORJA
Address: Centro, POlangui, Albay
Date, Place of Birth: April 16, 1978; Sampaloc,Manila
Social Security Number: Lost
Debts (Auto, Education, Personal, Credit Card, Mortgage, other)
Other loan insitution: RUSI
Address: Diversion Road, Polangui, Albay
Phone Number: 09275359634
Account Number:
Interest Rate:
Monthly Payment: P1,530 if on/before the due date; P1,730 after the due date
Total Balance Due: P41,520 (based on the after the due date figure)
(with date prepared)
Bank Accounts (Checking, Savings, CDs, Credit Union, Other)
Bank Name: G7 Bank
Type of Account: Savings
Account Number: 17898-12
Address: Ubaliw, Polangui, Albay
Phone Number:
Contact: Jonie Tinoco
Interest Rate:
Average Monthly Income:
Total Balance P503.05
(with date prepared)
Bank Name: Legazpi Savings Bank Bank
Type of Account: Savings
Account Number: 004-01-6601
Address: Basud, Polangui, Albay
Phone Number:
Contact:
Interest Rate: Effective Rate of interest of 2% per annum
Average Monthly Income:
Total Balance P4,003.07
(with date prepared)
Bank Name: Camalig Bank
Type of Account: Savings
Account Number: 18928
Address: Camalig, Albay
Phone Number:
Contact:
Interest Rate:
Average Monthly Income:
Total Balance P184.50
(with date prepared)
Brokerage Accounts (Stocks, Bonds, Mutual Funds) = 0
Investments held directly by you = 0
Real Estate Investments = 0
Retirement Plans = 0
Insurance Plans = 0
I AM SO HAPPY AND GREATFUL NOW THAT…
022908
1. I am successful!
2. I am a money magnet!
3. I have lots of friends!
4. I have lots of support!
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