Company Analysis: Past and Present practice questions

What to know

Identify the rule, formula, or decision criterion before reading the answer choices. CFA Level I distractors often use the right vocabulary with the wrong condition.

How to practice

Work each item under time pressure, then compare your reasoning with the step-by-step explanation and key takeaway.

Review signal

Missed questions should become scheduled reviews when the error comes from a concept gap, formula setup, or answer-choice trap.

Equity Investments

Company Analysis: Past and Present

A company's business model is best described as:

Equity Investments

Company Analysis: Past and Present

A company with strong pricing power is most likely able to:

Equity Investments

Company Analysis: Past and Present

A company has sales of 100, variable costs of 60, and fixed operating costs of 25. If sales increase by 5% and the cost structure is unchanged, operating income is expected to increase by approximately:

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Company Analysis: Past and Present

For a retailer, a rising inventory turnover ratio, with stable gross margins and no supply disruptions, most likely indicates:

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Company Analysis: Past and Present

A high-growth company increases revenue rapidly but consistently earns a return on invested capital below its cost of capital. The growth is most likely:

Equity Investments

Company Analysis: Past and Present

A company reports accounting ROE of 9%. Investors require 11% on equity with similar risk. The most accurate interpretation is that:

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Company Analysis: Past and Present

A beverage producer's revenue increased from USD 400.0 million to USD 441.0 million during the year, and units sold increased by 5.0%. Using exact multiplicative decomposition, the growth in average selling price is closest to:

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Company Analysis: Past and Present

A company reports revenue of USD 800 million, cost of goods sold of USD 480 million, selling, general, and administrative expenses of USD 160 million, and interest expense of USD 24 million. The company's operating profit margin is closest to:

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Company Analysis: Past and Present

A company reports operating profit of USD 150 million and has an effective tax rate of 20%. Total debt is USD 400 million and total equity is USD 600 million. The company's return on invested capital (ROIC) is closest to:

Equity Investments

Company Analysis: Past and Present

Which of the following operating expenses is most likely to vary directly with a company's revenue?

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Company Analysis: Past and Present

A company reports revenue growth of 12% for the year, of which 7 percentage points resulted from a business acquired during the year. The portion of growth attributable to the acquisition is best described as:

Equity Investments

Company Analysis: Past and Present

An analyst compares two apparel retailers. Retailer X reports a gross margin of 28% and includes distribution and store occupancy costs in cost of goods sold. Retailer Y reports a gross margin of 41% and includes those same cost types in selling, general, and administrative expenses. The analyst's most appropriate initial conclusion is that:

Equity Investments

Company Analysis: Past and Present

In Year 1, a company reported sales of USD 500 million and total operating costs of USD 420 million. In Year 2, sales were USD 600 million and total operating costs were USD 480 million. Using these two years to separate fixed and variable operating costs, the company's forecast operating profit at Year 3 sales of USD 700 million is closest to:

Equity Investments

Company Analysis: Past and Present

A company has inventory turnover of 6.0, receivables turnover of 10.0, and payables turnover of 8.0. Using a 365-day year, the company's cash conversion cycle is closest to:

Equity Investments

Company Analysis: Past and Present

A company reports net income of USD 230 million and pays preferred dividends of USD 30 million. Weighted average common shares outstanding are 50 million. Employees hold options on 4 million shares with an exercise price of USD 20, and the average market price of the stock during the year was USD 25. The company's diluted earnings per share is closest to:

Equity Investments

Company Analysis: Past and Present

An online retailer collects cash from customers at the time of sale, holds inventory for about 30 days, and pays suppliers about 75 days after purchase, resulting in a negative cash conversion cycle. If the retailer's revenue grows rapidly, the most likely effect on its cash position from working capital is that: