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.
Financial Statement Analysis
Analyzing Income Statements practice questions
Analyzing Income Statements is part of CFA Level I Financial Statement Analysis. Financial Statement Analysis questions require careful reading of accounting choices, ratios, cash flow classification, inventories, taxes, leases, and reporting quality. Use this page to review the controlling ideas, then work through 10 questions with answer explanations and common traps.
Review the worked explanations before moving into adaptive practice. The app version can mix this topic with due reviews and weak related concepts.
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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.
Financial Statement Analysis
Analyzing Income Statements
A travel-booking platform arranges hotel stays between guests and independent hotels. The hotels set room prices, bear the risk of unsold rooms, and are responsible for providing the stay; the platform collects payment from guests and retains a 10% commission. The platform should most likely recognize as revenue:
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Analyzing Income Statements
Veloria Foods began the year with 600,000 common shares outstanding. On 1 July it executed a 2-for-1 stock split, and on 1 October it repurchased 60,000 shares. Net income for the year is $2,370,000 and the company has no preferred stock. Basic EPS is closest to:
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Analyzing Income Statements
Kestrel Dynamics reports net income of $4,500,000 with 1,500,000 weighted-average common shares outstanding. It has 200,000 employee stock options with an exercise price of $25 (average market price $40) and a $10,000,000 face value convertible bond with a 6% annual coupon, convertible into 300,000 common shares. The tax rate is 25%. Diluted EPS is closest to:
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Analyzing Income Statements
Under revenue recognition from contracts with customers, a performance obligation is best described as:
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Analyzing Income Statements
A cost that is expensed in the period incurred rather than capitalized is most likely a:
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Analyzing Income Statements
A company reports revenue of 800, cost of goods sold of 500, selling expense of 120, administrative expense of 80, and interest expense of 30. Gross profit margin is closest to:
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Analyzing Income Statements
A company sells equipment classified as part of an operating segment it has exited and reports the result separately below income from continuing operations. The item is most likely classified as:
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Analyzing Income Statements
A software company receives cash in advance for a one-year subscription and provides service evenly over the year. Revenue is most likely recognized:
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Analyzing Income Statements
A distributor reports sales gross rather than net. The most likely analytical effect, holding profit constant, is:
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Analyzing Income Statements
During the current year a company capitalizes 90 of costs that another company expenses immediately. Ignoring taxes and depreciation, current-year net income and total assets of the capitalizing company are most likely:
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