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Free Questions › CFA › Corporate Issuers
Free CFA Corporate Issuers Practice Questions & Answers
900 exam-style Corporate Issuers questions. Pick your answer, hit Check answer, and see the worked solution — free to start, no signup.
100% free · No login to startQuestion 841
Which of the following is a material ESG factor for an oil refinery?
Select an option first.
Correct answer: B — Pollution and emissions
Explanation: B is correct because refineries face major environmental risks. **A, C, and D are less central.
Question 842
Which of the following ESG issues would most likely create long-term transition risk for an energy company?
Select an option first.
Correct answer: B — A new carbon tax policy
Explanation: B is correct because carbon taxes directly affect long-term profitability and business models. A and D are short-term operational issues. C is a labor issue, not a transition risk.
Question 843
Which of the following best explains why bondholders prefer companies to invest in low-risk projects?
Select an option first.
Correct answer: B — Bondholder returns are capped
Explanation: B is correct because capped returns mean bondholders gain nothing from risky upside but bear default risk. A is wrong because bondholders do not share profits. C is wrong because they do not vote. D is wrong because high leverage increases their risk.
Question 844
Which of the following is a typical social factor relevant to ESG analysis?
Select an option first.
Correct answer: B — Employee turnover
Explanation: B is correct because turnover affects productivity and morale. A and D are governance factors. C is environmental.
Question 845
Which of the following is a governance factor that analysts evaluate?
Select an option first.
Correct answer: C — Board composition
Explanation: C is correct because governance includes board structure and oversight. A and D are environmental. B is social.
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Question 846
Which of the following is a material ESG factor for a company operating in a natural-resource-intensive industry?
Select an option first.
Correct answer: B — Biodiversity impact
Explanation: B is correct because resource-intensive industries directly affect ecosystems. A is more relevant to tech. C is governance. D is unrelated.
Question 847
Which of the following best explains why equity holders prefer management to pursue high-risk, high-return projects?
Select an option first.
Correct answer: B — Equity holders have unlimited upside
Explanation: B is correct because unlimited upside incentivizes risk-taking. A and D describe debt, not equity. C is wrong because equity is junior.
Question 848
Which of the following is a typical environmental factor considered in ESG analysis?
Select an option first.
Correct answer: B — Pollution and waste
Explanation: B is correct because pollution is an environmental issue. A and D are governance. C is social.
Question 849
Which of the following is a likely impact of a major environmental disaster on a company’s debt?
Select an option first.
Correct answer: B — Higher probability of default
Explanation: B is correct because environmental disasters increase financial stress. A is the opposite of expected. C is not guaranteed. D is incorrect.
Question 850
Which of the following is a key reason ESG factors matter more today than in the past?
Select an option first.
Correct answer: B — Stakeholders demand greater accountability
Explanation: B is correct because stakeholder pressure has increased. A, C, and D contradict current trends.
Question 851
Which of the following is an example of a governance-related ESG opportunity?
Select an option first.
Correct answer: A — Improving board independence
Explanation: A is correct because board independence strengthens governance. B is environmental. C and D are social.
Question 852
Which of the following is a likely effect of high employee turnover?
Select an option first.
Correct answer: B — Higher operating expenses
Explanation: B is correct because turnover increases hiring and training costs. A and C are the opposite of expected. D is incorrect because turnover can harm reputation.
Question 853
Which of the following best describes how ESG failures affect equity holders?
Select an option first.
Correct answer: B — Equity absorbs losses first
Explanation: B is correct because equity is the residual claimant. A is false. C is wrong because equity is junior. D describes debt.
Question 854
Which of the following is a likely impact of a major governance scandal on long-term debt?
Select an option first.
Correct answer: B — Higher yields demanded by investors
Explanation: B is correct because governance failures increase perceived risk, raising yields. A is incorrect because risk increases. C is unrealistic. D is false.
Question 855
Which of the following best explains why ESG factors must be incorporated into valuation models?
Select an option first.
Correct answer: B — ESG factors can materially affect future cash flows and risk
Explanation: B is correct because ESG issues can alter cash flows, discount rates, and risk. A and C are incorrect because ESG is financially material. D is wrong because ESG does not guarantee higher valuations.
Question 856
Which of the following is a feature of corporate equity financing?
Select an option first.
Correct answer: B — It gives investors ownership rights
Explanation: B is correct because equity investors become owners. A is wrong because equity does not require repayment. C is wrong because dividends are discretionary. D is wrong because equity has no maturity.
Question 857
Which scenario illustrates financial leverage?
Select an option first.
Correct answer: B — A firm borrows more relative to its equity base
Explanation: B is correct because leverage refers to increasing debt relative to equity. A is wrong because issuing equity reduces leverage. C is wrong because dividends do not affect leverage directly. D is wrong because operating expenses are unrelated to leverage.
Question 858
Why do bondholders prefer lower financial leverage?
Select an option first.
Correct answer: B — It reduces the risk of default
Explanation: B is correct because lower leverage reduces the chance of missed payments. A is wrong because bondholders have no upside beyond fixed payments. C is wrong because dividends do not concern bondholders. D is wrong because bondholders have no voting rights.
Question 859
Which of the following best describes financial leverage?
Select an option first.
Correct answer: B — Increasing debt relative to equity
Explanation: B is correct because leverage increases when debt rises relative to equity. **A reduces leverage. **C is unrelated. **D does not affect leverage directly.
Question 860
Which type of financing requires repayment with interest?
Select an option first.
Correct answer: C — Debt
Explanation: C is correct because debt financing requires repayment plus interest. A is wrong because equity does not require repayment. B is wrong because dividends are optional distributions. D is wrong because retained earnings are internal funds.
Question 861
Which statement best describes economic profit?
Select an option first.
Correct answer: C — Profit above the required return on equity
Explanation: C is correct because economic profit is net income minus the required return on equity. A is wrong because tax-adjusted profit is not economic profit. B is wrong because dividends do not define economic profit. D is wrong because EBIT is not economic profit.
Question 862
Which of the following is a key feature of shareholder voting rights?
Select an option first.
Correct answer: B — They allow shareholders to elect the board
Explanation: B is correct because shareholders elect directors. A is wrong because shareholders do not manage operations. C is wrong because dividends are not guaranteed. D is wrong because management retains authority.
Question 863
Which of the following is a key feature of corporate taxation?
Select an option first.
Correct answer: C — Profits may be taxed at both corporate and shareholder levels
Explanation: C is correct because corporations face double taxation when dividends are paid. A is wrong because profits are not taxed only once. B is wrong because dividends are usually taxable. D is wrong because reinvested profits avoid shareholder tax, not corporate tax.
Question 864
Which of the following is a characteristic of economic profit?
Select an option first.
Correct answer: C — Profit above the required return on equity
Explanation: C is correct because economic profit is net income minus the required return on equity. A is wrong because net income does not account for opportunity cost. B is wrong because dividends do not define profit. D is wrong because EBIT is not economic profit.
Question 865
Which of the following is a feature of corporate equity?
Select an option first.
Correct answer: B — Ownership stake
Explanation: B is correct because equity represents ownership. A is wrong because equity has no repayment schedule. C is wrong because dividends are discretionary. D is wrong because debt has priority.
Question 866
Which of the following is a reason corporations issue equity?
Select an option first.
Correct answer: B — To raise capital without increasing debt
Explanation: B is correct because equity raises capital without increasing leverage. A is wrong because equity causes dilution. C is wrong because dividends are not guaranteed. D is wrong because equity issuance increases shareholders.
Question 867
Which of the following is a reason private companies may offer high returns?
Select an option first.
Correct answer: B — They are early-stage and high-growth
Explanation: B is correct because early-stage private companies can generate high returns if successful. A is wrong because private companies face significant risk. C is wrong because liquidity is low. D is wrong because dividends are not required.
Question 868
What is one reason SPACs place IPO proceeds in a trust account?
Select an option first.
Correct answer: B — To ensure funds are available only for an acquisition
Explanation: B is correct because SPAC rules require proceeds to be held in trust and used only for acquiring a private company. A is wrong because sponsors cannot freely invest the funds. C is wrong because SPACs do not pay dividends from trust funds. D is wrong because profits are never guaranteed.
Question 869
Which of the following is a potential benefit of going private?
Select an option first.
Correct answer: B — Ability to restructure outside public view
Explanation: B is correct because private ownership allows restructuring without public pressure. A is wrong because scrutiny decreases. C is wrong because dividends are not mandatory. D is wrong because valuation is not guaranteed.
Question 870
Why are interest payments considered a priority claim?
Select an option first.
Correct answer: B — They must be paid before any distributions to shareholders
Explanation: B is correct because interest payments legally take priority over shareholder distributions. A is wrong because interest is not optional. C is wrong because dividends are subordinate to interest. D is wrong because interest is paid during normal operations, not only in liquidation.
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