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Series XV · Practice Set 1

NISM Series XV: Research Analyst Certification — Practice Set 1 Practice Questions

Original practice set for NISM Series XV: Research Analyst Certification. Every question below shows the correct answer and a full explanation, so you can read through this set as a study page or attempt it as a timed mock test.

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Practice questions

All 30 questions in Practice Set 1

Read each question, think through your answer, then expand it to check the correct option and explanation.

Financial Statement Analysis

Q1. EPS (Earnings Per Share) is calculated as:

  1. A. Total Revenue / Total Shares
  2. B. Net Profit attributable to equity holders / Weighted average equity shares outstanding
  3. C. Operating Profit / Total Shares
  4. D. EBITDA / Total Shares
Show correct answer & explanation

Correct answer: B. Net Profit attributable to equity holders / Weighted average equity shares outstanding

EPS = Net Profit attributable to equity shareholders / Weighted average number of equity shares outstanding during the period. It measures the profit earned per equity share and is a key indicator of company profitability.
Valuation Methods

Q2. The Price-to-Earnings (P/E) ratio is calculated as:

  1. A. Revenue per share / EPS
  2. B. Market price per share / Earnings per share (EPS)
  3. C. Book value per share / EPS
  4. D. Dividend per share / EPS
Show correct answer & explanation

Correct answer: B. Market price per share / Earnings per share (EPS)

P/E Ratio = Market Price per Share / Earnings per Share (EPS). It indicates how much investors are willing to pay for each rupee of earnings. A higher P/E suggests higher growth expectations or overvaluation.
Valuation Methods

Q3. DCF (Discounted Cash Flow) valuation is based on:

  1. A. Historical earnings multiples
  2. B. Present value of expected future cash flows discounted at appropriate rate
  3. C. Book value of assets
  4. D. Revenue multiplied by industry average margin
Show correct answer & explanation

Correct answer: B. Present value of expected future cash flows discounted at appropriate rate

DCF valuation estimates the intrinsic value of a company by discounting its expected future free cash flows to the present value using the Weighted Average Cost of Capital (WACC) or required rate of return.
Valuation Methods

Q4. WACC stands for and is used as:

  1. A. Working Asset Capital Cost — used to calculate dividends
  2. B. Weighted Average Cost of Capital — used as the discount rate in DCF analysis
  3. C. Weighted Annual Cash Cost — used for budgeting
  4. D. Working Average Capital Calculation — used for balance sheets
Show correct answer & explanation

Correct answer: B. Weighted Average Cost of Capital — used as the discount rate in DCF analysis

WACC stands for Weighted Average Cost of Capital. It represents the average rate a company pays to finance its assets (equity + debt, weighted by their proportions). It is used as the discount rate in DCF valuation.
Financial Statement Analysis

Q5. EBITDA stands for:

  1. A. Earnings Before Interest, Tax, Depreciation and Amortisation
  2. B. Equity Before Income Tax Dividend Adjustment
  3. C. Earnings Before Income Tax Discount Allowance
  4. D. Effective Business Income Tax Depreciation Amount
Show correct answer & explanation

Correct answer: A. Earnings Before Interest, Tax, Depreciation and Amortisation

EBITDA = Earnings Before Interest, Tax, Depreciation and Amortisation. It measures core operational profitability before the impact of financing decisions, taxes, and non-cash accounting charges. It is widely used for valuation comparisons.
Financial Statement Analysis

Q6. Return on Equity (ROE) is calculated as:

  1. A. Net Profit / Total Assets
  2. B. Net Profit / Shareholders' Equity
  3. C. Revenue / Shareholders' Equity
  4. D. Operating Profit / Shareholders' Equity
Show correct answer & explanation

Correct answer: B. Net Profit / Shareholders' Equity

ROE = Net Profit / Shareholders' Equity. It measures how efficiently a company uses shareholders' equity to generate profits. Higher ROE generally indicates better profitability and efficient use of equity capital.
Financial Statement Analysis

Q7. Current Ratio measures a company's:

  1. A. Long-term solvency
  2. B. Short-term liquidity and ability to meet near-term obligations
  3. C. Profitability compared to peers
  4. D. Asset turnover efficiency
Show correct answer & explanation

Correct answer: B. Short-term liquidity and ability to meet near-term obligations

Current Ratio = Current Assets / Current Liabilities. It measures a company's ability to pay its short-term obligations with its short-term assets. A ratio above 1 indicates the company has more current assets than current liabilities.
Financial Statement Analysis

Q8. Debt-to-Equity (D/E) ratio measures:

  1. A. Company's short-term liquidity
  2. B. Proportion of debt financing relative to equity financing
  3. C. Revenue growth rate
  4. D. Operating efficiency
Show correct answer & explanation

Correct answer: B. Proportion of debt financing relative to equity financing

Debt-to-Equity ratio = Total Debt / Shareholders' Equity. It measures the proportion of a company financed by creditors (debt) versus shareholders (equity). Higher D/E indicates greater financial leverage and risk.
Technical Analysis

Q9. RSI (Relative Strength Index) is a:

  1. A. Trend-following indicator
  2. B. Momentum oscillator that measures speed and change of price movements
  3. C. Volume indicator
  4. D. Volatility indicator
Show correct answer & explanation

Correct answer: B. Momentum oscillator that measures speed and change of price movements

RSI is a momentum oscillator that measures the speed and change of price movements. It oscillates between 0 and 100. RSI above 70 is generally considered overbought (potential sell signal) and below 30 as oversold (potential buy signal).
Technical Analysis

Q10. A Golden Cross in technical analysis occurs when:

  1. A. 50-day MA crosses above 200-day MA — bullish signal
  2. B. 200-day MA crosses above 50-day MA — bearish signal
  3. C. RSI crosses above 70
  4. D. MACD line crosses zero from below
Show correct answer & explanation

Correct answer: A. 50-day MA crosses above 200-day MA — bullish signal

A Golden Cross is a bullish technical signal that occurs when a shorter-term moving average (typically 50-day) crosses ABOVE a longer-term moving average (typically 200-day), signalling potential upward price momentum.
Technical Analysis

Q11. A Head and Shoulders pattern in technical analysis is a:

  1. A. Bullish continuation pattern
  2. B. Bearish reversal pattern formed at the top of an uptrend
  3. C. Neutral consolidation pattern
  4. D. Bullish reversal pattern at bottom of a downtrend
Show correct answer & explanation

Correct answer: B. Bearish reversal pattern formed at the top of an uptrend

A Head and Shoulders is a bearish reversal pattern that forms at the top of an uptrend. It has three peaks — left shoulder, head (highest), right shoulder. A break below the 'neckline' confirms the bearish reversal.
Technical Analysis

Q12. MACD (Moving Average Convergence Divergence) is calculated as:

  1. A. Slow EMA minus Fast EMA
  2. B. Fast EMA (12-day) minus Slow EMA (26-day)
  3. C. RSI minus Signal Line
  4. D. Closing Price minus Opening Price
Show correct answer & explanation

Correct answer: B. Fast EMA (12-day) minus Slow EMA (26-day)

MACD = Fast EMA (typically 12-day) minus Slow EMA (typically 26-day). A 9-day EMA of MACD serves as the signal line. When MACD crosses above the signal line, it's bullish; below is bearish.
Technical Analysis

Q13. Support level in technical analysis refers to:

  1. A. Price level above which stock has difficulty rising
  2. B. Price level below which stock has historically found buying interest
  3. C. The 52-week high price
  4. D. The analyst's target price
Show correct answer & explanation

Correct answer: B. Price level below which stock has historically found buying interest

A support level is a price point where a stock has historically found buying interest and difficulty in falling further. When price approaches support, buyers tend to enter, potentially reversing the downward trend.
Valuation Methods

Q14. Price-to-Book (P/B) ratio is calculated as:

  1. A. Market price per share / Book value per share
  2. B. Book value / Market price
  3. C. Net Profit / Book value
  4. D. Market Cap / Revenue
Show correct answer & explanation

Correct answer: A. Market price per share / Book value per share

P/B Ratio = Market Price per Share / Book Value per Share. Book value is the net worth of a company per share (Total Assets - Total Liabilities / Shares). P/B < 1 may indicate the stock is undervalued relative to its net assets.
Valuation Methods

Q15. Enterprise Value (EV) is calculated as:

  1. A. Market Cap only
  2. B. Market Cap + Total Debt - Cash and Cash Equivalents
  3. C. Revenue × P/E ratio
  4. D. Net Profit × Industry multiple
Show correct answer & explanation

Correct answer: B. Market Cap + Total Debt - Cash and Cash Equivalents

Enterprise Value (EV) = Market Capitalisation + Total Debt - Cash and Cash Equivalents. It represents the total economic value of a company, including both equity and debt, and is used in EV/EBITDA and other acquisition-focused metrics.
Macro Economics

Q16. GDP (Gross Domestic Product) measures:

  1. A. Total exports of a country
  2. B. Total monetary value of all final goods and services produced within a country in a specific period
  3. C. Total government revenue
  4. D. Total market capitalisation of listed companies
Show correct answer & explanation

Correct answer: B. Total monetary value of all final goods and services produced within a country in a specific period

GDP measures the total monetary value of all final goods and services produced within a country's borders during a specific time period (typically quarterly or annually). It is the broadest measure of a country's economic output.
Macro Economics

Q17. WPI stands for and measures:

  1. A. Wholesale Price Index — measures inflation at producer/wholesale level
  2. B. Weekly Price Indicator — measures weekly price changes
  3. C. Weighted Price Indicator — measures weighted average prices
  4. D. Wholesale Profit Index — measures wholesale margins
Show correct answer & explanation

Correct answer: A. Wholesale Price Index — measures inflation at producer/wholesale level

WPI stands for Wholesale Price Index. It measures the average change in prices of goods traded in bulk at the wholesale level (producer/manufacturer to retailer), capturing inflation before it reaches consumers.
Macro Economics

Q18. When the Reserve Bank of India increases the repo rate, it generally leads to:

  1. A. Lower borrowing costs and economic expansion
  2. B. Higher borrowing costs, reduced lending, and lower inflation
  3. C. Immediate stock market rally
  4. D. Depreciation of the Indian Rupee
Show correct answer & explanation

Correct answer: B. Higher borrowing costs, reduced lending, and lower inflation

When RBI increases the repo rate (rate at which banks borrow from RBI), banks increase lending rates, making borrowing more expensive. This reduces credit growth, cools economic activity, and helps control inflation.
Macro Economics

Q19. CRR (Cash Reserve Ratio) is:

  1. A. The rate at which RBI lends to banks
  2. B. The percentage of deposits banks must keep with RBI as cash reserves
  3. C. The minimum SLR requirement
  4. D. The interest rate on government bonds
Show correct answer & explanation

Correct answer: B. The percentage of deposits banks must keep with RBI as cash reserves

CRR (Cash Reserve Ratio) is the percentage of a bank's net demand and time liabilities (deposits) that must be maintained as cash reserves with the RBI. Increasing CRR reduces money supply in the economy.
Regulations

Q20. A Research Analyst must be registered with:

  1. A. RBI
  2. B. AMFI
  3. C. SEBI under SEBI (Research Analyst) Regulations, 2014
  4. D. Stock Exchange directly
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Correct answer: C. SEBI under SEBI (Research Analyst) Regulations, 2014

Research Analysts in India must register with SEBI under the SEBI (Research Analyst) Regulations, 2014. Any person or entity publishing research reports for investors must have this registration from SEBI.
Regulations

Q21. Under SEBI (Research Analyst) Regulations, a Research Analyst must disclose if:

  1. A. They have passed NISM exam
  2. B. They hold financial interest in recommended securities
  3. C. They have worked in equity markets
  4. D. They are CFA certified
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Correct answer: B. They hold financial interest in recommended securities

SEBI Research Analyst Regulations require analysts to disclose material conflicts of interest, including if they hold, or their firm holds, a financial interest in the securities being covered in the research report. This ensures transparency.
Research Report Writing

Q22. A research report typically includes:

  1. A. Only the buy/sell recommendation
  2. B. Company background, financial analysis, valuation, risks, and recommendation with target price
  3. C. Only stock price targets
  4. D. Only past performance data
Show correct answer & explanation

Correct answer: B. Company background, financial analysis, valuation, risks, and recommendation with target price

A comprehensive research report typically includes: company overview, industry analysis, financial analysis (P&L, balance sheet, cash flow), valuation (DCF, multiples), key risks, and a recommendation with target price and investment horizon.
Financial Statement Analysis

Q23. Free Cash Flow (FCF) is calculated as:

  1. A. Net Profit + Depreciation
  2. B. Operating Cash Flow minus Capital Expenditure
  3. C. Revenue minus Total Costs
  4. D. EBITDA minus Taxes
Show correct answer & explanation

Correct answer: B. Operating Cash Flow minus Capital Expenditure

Free Cash Flow (FCF) = Operating Cash Flow - Capital Expenditure (CapEx). It represents the cash a company generates after accounting for capital investments needed to maintain or grow the business. FCF is key for DCF valuation.
Technical Analysis

Q24. Bollinger Bands consist of:

  1. A. Only a simple moving average
  2. B. A middle band (SMA), an upper band (SMA + 2 standard deviations), and a lower band (SMA - 2 standard deviations)
  3. C. Two exponential moving averages
  4. D. RSI and MACD combined
Show correct answer & explanation

Correct answer: B. A middle band (SMA), an upper band (SMA + 2 standard deviations), and a lower band (SMA - 2 standard deviations)

Bollinger Bands consist of: (1) a middle band — typically a 20-day simple moving average, (2) an upper band — middle band + 2 standard deviations, and (3) a lower band — middle band - 2 standard deviations. They measure volatility.
Valuation Methods

Q25. The terminal value in a DCF model represents:

  1. A. First year's free cash flow
  2. B. The value of all cash flows beyond the explicit forecast period
  3. C. The total debt of the company
  4. D. The company's book value at the end of projection period
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Correct answer: B. The value of all cash flows beyond the explicit forecast period

Terminal Value in DCF represents the present value of all cash flows beyond the explicit forecast period (usually 5-10 years), typically assumed to grow at a constant rate in perpetuity. It often constitutes a large portion of total DCF value.
Financial Statement Analysis

Q26. Inventory Turnover Ratio measures:

  1. A. How often a company replenishes cash
  2. B. How many times a company sells and replaces its inventory in a period
  3. C. Company's ability to pay debt
  4. D. Return on investment
Show correct answer & explanation

Correct answer: B. How many times a company sells and replaces its inventory in a period

Inventory Turnover = Cost of Goods Sold / Average Inventory. It measures how efficiently a company manages its inventory — how many times it sells and replaces inventory during a period. Higher ratio generally indicates efficient inventory management.
Macro Economics

Q27. Fiscal deficit is defined as:

  1. A. Difference between exports and imports
  2. B. Excess of government's total expenditure over its total revenue (excluding borrowings)
  3. C. Difference between GDP and GNP
  4. D. Total government debt outstanding
Show correct answer & explanation

Correct answer: B. Excess of government's total expenditure over its total revenue (excluding borrowings)

Fiscal Deficit = Government's Total Expenditure - Total Revenue (excluding borrowings). It represents the amount the government needs to borrow to meet its expenditure. Higher fiscal deficit can lead to inflation and currency depreciation.
Technical Analysis

Q28. Volume in technical analysis is important because:

  1. A. Higher volume always means price will rise
  2. B. Volume confirms price trends — high volume on breakout signals strength, low volume signals weakness
  3. C. Volume has no relationship with price
  4. D. Volume only matters for intraday trading
Show correct answer & explanation

Correct answer: B. Volume confirms price trends — high volume on breakout signals strength, low volume signals weakness

Volume confirms price trends. A price breakout accompanied by high volume is a stronger, more reliable signal than a breakout on low volume. Declining volume during a trend may indicate the trend is losing momentum.
Regulations

Q29. SEBI (Research Analyst) Regulations define a Research Report as:

  1. A. Any verbal recommendation made by an analyst
  2. B. Any written or electronic communication containing a recommendation, opinion, or rating about a security
  3. C. Only formal reports published by brokers
  4. D. Annual reports published by companies
Show correct answer & explanation

Correct answer: B. Any written or electronic communication containing a recommendation, opinion, or rating about a security

SEBI defines a research report as any written or electronic communication that contains a recommendation, opinion, or rating about a security or issuer, intended for distribution to clients or the public.
Valuation Methods

Q30. PEG ratio (Price/Earnings to Growth) is calculated as:

  1. A. P/E ratio × Growth rate
  2. B. P/E ratio / Expected earnings growth rate
  3. C. P/E ratio + Growth rate
  4. D. Growth rate / P/E ratio
Show correct answer & explanation

Correct answer: B. P/E ratio / Expected earnings growth rate

PEG Ratio = P/E Ratio / Expected Earnings Growth Rate. It adjusts the P/E ratio for expected growth, providing a more complete picture of valuation. A PEG below 1 may indicate undervaluation relative to growth prospects.

How to use this set

Work through the questions in order without expanding the answers first, exactly as you would in the real Series XV exam. Once you have picked an option, expand the answer to confirm whether you were right and read the explanation, even for questions you answered correctly, since the reasoning behind each option is where most of the learning happens.

If you get a question wrong, note the topic tag above the question and revisit that topic in the Series XV exam page before your next attempt. When you are ready for exam-condition practice, use the timed mock test above; it shuffles these questions, applies the negative marking rule, and gives you a scored review at the end.