Company Analysis – Financial Analysis
16 questions. Each answer is explained.
Question 1 of 10Practice · Series XV — Research Analyst
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Learn these topics
More units in NISM Series XV
- Introduction to Research Analyst Profession2
- Introduction to Securities Market3
- Terminology in Equity and Debt Markets3
- Fundamentals of Research7
- Economic Analysis7
- Industry Analysis12
- Company Analysis – Business and Governance9
- Corporate Actions7
- Valuation Principles13
- Fundamental analysis of commodities9
- Fundamentals of Risk and Return10
- Qualities of a Good Research Report7
- Legal and Regulatory Environment15
- Technical Analysis22
- Case Study - Valuation8
Exam format
| Questions | 100 · 1 mark each |
|---|---|
| Duration | 120 min · 2 hours |
| Pass mark | 60% · 60 of 100 marks |
| Negative marking | 25% · 0.25 marks off per wrong answer |
| Certificate validity | 3 years · from the date of the examination |
| Marks for this unit | Not published by NISM |
NISM Series XV Research Analyst
Exam rules read on NISM's site on 3 October 2026. Exam pattern revised on 20 January 2026. Check the current rules on NISM's site (opens in a new tab)
What these answers assume, and when it was last checked
Each question uses the rules listed below. We last checked them on 5 September 2026. A Budget or SEBI circular can change a rate, lot size or expiry day. If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.
- NSE uses Tuesday expiry and BSE uses Thursday expiry. This applies from 1 September 2025.
- The January 2026 index lot sizes are NIFTY 65, BANKNIFTY 30, FINNIFTY 60, MIDCPNIFTY 120 and NIFTYNXT50 25.
- The October 2024 SEBI framework sets a minimum index contract value of Rs 15–20 lakh. Each exchange may list one weekly benchmark index.
- Option buyers pay the premium upfront from 1 February 2025. A short index option has an extra 2% Extreme Loss Margin on expiry day from 20 November 2024.
- Equity short-term capital gains are taxed at 20%. Long-term gains are taxed at 12.5% above Rs 1.25 lakh. Both rates apply from 23 July 2024.
- F&O income is non-speculative business income in ITR-3. NSE equity derivatives trade from 9:15 a.m. to 3:40 p.m.
- The final ten-minute session began on 3 August 2026. It aligns with the cash market Closing Auction Session.
- Most Securities Transaction Tax questions test the base and who pays. On an option sale, it is the premium and the seller pays. On a futures sale, it is the traded value and the seller pays.
- On exercise, Securities Transaction Tax uses intrinsic value: settlement price minus strike price. The buyer pays it.
- Two questions test the current rate. From 1 April 2026, option sales carry 0.15% on the premium and futures sales carry 0.05% on traded price. The earlier rates were 0.10% and 0.02% from 1 October 2024.
- This section uses the T+1 rolling settlement cycle. Obligations are fixed on T+1. A short delivery goes to buy-in auction on T+1 and settles on T+2.
- The trade-for-trade surveillance segment uses direct close-out. Funds pay in by 10:30 a.m. and pay out on or after 1:30 p.m. on settlement day.
- Securities pay in to the settlement pool by 10:30 a.m. They pay out directly to the client’s demat account by 3:30 p.m.
- The 3:30 p.m. deadline replaced 1:30 p.m. under SEBI’s 10 October 2024 circular. Direct client credit was required by SEBI’s 5 June 2024 circular.
- The optional T+0 cycle trades until 1:30 p.m. Obligations are fixed by 2:30 p.m. on the trade day. An early pay-in shortage is closed out directly.
- Cash-market Value at Risk margin is six times exponentially weighted moving-average volatility. It has a 9% floor for Group I, a 21.5% floor for Group II, and a fixed 50% or 75% level for Group III.
- Extreme Loss Margin is 3.5% for a share and 2% for a broad-market-index exchange traded fund. Mark-to-market margin is collected before the next day’s trading. The trade-for-trade segment has 100% upfront margin.
- Close-out uses the higher of the highest price from trade day to auction day and 20% above the auction day’s official close.
- A funds shortage costs 0.07% a day. The trading facility is withdrawn at a shortage of Rs 5 lakh or more.
- SCORES allows 21 calendar days, then two 15-day review levels. Online Dispute Resolution moves from conciliation to arbitration after the market participant and SCORES steps.
- At NSE, the Investor Protection Fund limit is Rs 35 lakh per investor for each defaulting or expelled member. This applies to claims arising after 13 August 2024.
- A Basic Services Demat Account has no annual maintenance charge up to Rs 4 lakh of holdings. It costs up to Rs 100 above that, until the Rs 10 lakh eligibility ceiling. These slabs apply from 1 September 2024.
- The rupee pairs are USD-INR, EUR-INR, GBP-INR and JPY-INR. The cross-currency pairs are EUR-USD, GBP-USD and USD-JPY.
- Each contract covers 1,000 units of the foreign currency, except JPY-INR. JPY-INR covers 100,000 yen and is quoted in rupees per 100 yen.
- The tick is 0.25 paise, or Rs 0.0025. It equals Rs 2.50 a contract.
- Rupee pairs trade from 9:00 a.m. to 5:00 p.m. A monthly contract stops trading at 12:30 p.m. two working days before the expiry month’s last business day.
- Final settlement is in cash at the FBIL reference rate on expiry day. FBIL, Financial Benchmarks India, has published this rate in place of the Reserve Bank since 2018. Premium-style European options are quoted in rupees. The buyer pays the premium in cash on T+1.
- Daily settlement is on T+1 and final settlement is on T+2.
- NSE Clearing circular 026/2020 sets SPAN margin plus Extreme Loss Margin. The futures margin is 0.50% for USD-INR, 0.15% for EUR-INR, 0.25% for GBP-INR and 0.35% for JPY-INR. A short option has 0.75%. These figures apply from 1 June 2020.
- A USD-INR client may hold 6% of total open interest or USD 20 million, whichever is higher. A trading member may hold 15% or USD 100 million.
- A resident user has one USD 100 million equivalent limit across all rupee pairs and exchanges. No document is needed below that limit, but a valid underlying contracted exposure must still exist. This clarification applies from 3 May 2024.
- The currency segment has no Securities Transaction Tax.
The exam figures (questions, time, pass mark, negative marking and certificate validity) come from NISM's own pages, read on 3 October 2026. Timed practice uses the same figures. Study with the official workbook as well.
The written-out answers on this page are hidden while your timed set runs.
All 16 questions on Company Analysis – Financial Analysis, with answers
Q1Gamma Ltd. reports current assets of ₹540 crore and current liabilities of ₹270 crore. Its current ratio is:
Option A. 0.5 times
Why it is wrong: This is obtained by reversing the ratio.
Option B. 2.0 times — Correct answer
Option C. 1.5 times
Why it is wrong: It does not follow from the given figures.
Option D. 3.0 times
Why it is wrong: It overstates the ratio.
Answer: B. Current ratio = Current assets ÷ Current liabilities = 540 ÷ 270 = 2.0 times. Remember: Current ratio measures current assets relative to current liabilities.
Hint, shown before you answer in practice mode: Common mistake: Reversing current assets and current liabilities.
XV-006mediumnumerical
Q2A company has a net profit margin of 9%, asset turnover of 1.4 times and an equity multiplier of 2.2 times. Using the three-step DuPont identity, its ROE is closest to:
Option A. 12.6%
Why it is wrong: 9% × 1.4 = 12.6%. This omits the equity multiplier.
Option B. 19.8%
Why it is wrong: 9% × 2.2 = 19.8%. This omits asset turnover.
Option C. 27.7% — Correct answer
Option D. 31.5%
Why it is wrong: It is not produced by the stated inputs.
Answer: C. ROE = Net profit margin × Asset turnover × Equity multiplier = 9% × 1.4 × 2.2 = 27.72%, approximately 27.7%. Remember: DuPont decomposes ROE into profitability, asset efficiency and financial leverage.
Hint, shown before you answer in practice mode: Common mistake: Multiplying only two of the three components.
XV-007hardnumerical
Q3An analyst is valuing an operating business using an enterprise-value DCF and discounts cash flows at the weighted average cost of capital (WACC). Which cash-flow measure is conceptually consistent with that approach?
Option A. Free cash flow to equity (FCFE)
Why it is wrong: FCFE is normally used to value equity directly, discounted at the cost of equity.
Option B. Dividends paid to ordinary shareholders
Why it is wrong: Dividends are distributions to equity holders, not enterprise cash flow.
Option C. Free cash flow to the firm (FCFF) — Correct answer
Option D. Net profit attributable to ordinary shareholders
Why it is wrong: Accounting profit is not the same as free cash flow available to capital providers.
Answer: C. FCFF is the cash flow available to all providers of capital and is therefore consistent with valuing the enterprise using WACC. FCFE is an equity cash flow and is normally paired with the cost of equity. Remember: Match the cash-flow definition to the discount rate and valuation level.
Hint, shown before you answer in practice mode: Common mistake: Discounting FCFE at WACC or FCFF at the cost of equity.
XV-008mediumconceptual
Q4A company reports three years of rising net profit, but cash flow from operations remains negative because trade receivables and contract assets are expanding much faster than revenue. Which is the most appropriate analytical response?
Option A. Conclude that earnings quality is unquestionably strong because reported profit has risen for three years
Why it is wrong: Rising accounting profit alone does not establish earnings quality.
Option B. Treat the gap as a possible earnings-quality warning and investigate revenue recognition and collections — Correct answer
Option C. Ignore cash flow because depreciation and other non-cash items make cash-flow statements unreliable
Why it is wrong: Depreciation is non-cash, but that is not a reason to ignore operating cash flow.
Option D. Assume the company must be insolvent immediately, unable to pay its debts as they fall due
Why it is wrong: Negative operating cash flow does not automatically mean immediate insolvency.
Answer: B. Persistent divergence between reported profit and operating cash flow can be an earnings-quality warning, particularly when receivables or contract assets grow unusually fast. It does not by itself prove manipulation or insolvency, but it warrants investigation. Remember: Profit growth should be cross-checked against cash conversion and working-capital behaviour.
Hint, shown before you answer in practice mode: Common mistake: Treating a red flag as proof of fraud, or ignoring it entirely.
XV-009mediumconceptual
Q5Delta Ltd. has a market capitalisation of ₹2,100 crore, debt of ₹500 crore, cash of ₹200 crore and EBITDA of ₹300 crore. Assuming no other enterprise-value adjustments, its EV/EBITDA multiple is:
Option A. 7.0 times
Why it is wrong: This uses market capitalisation divided by EBITDA and ignores net debt.
Option B. 8.0 times — Correct answer
Option C. 9.0 times
Why it is wrong: It overstates enterprise value relative to the stated inputs.
Option D. 10.0 times
Why it is wrong: It does not follow from the calculation.
Answer: B. Enterprise value = 2,100 + 500 − 200 = ₹2,400 crore. EV/EBITDA = 2,400 ÷ 300 = 8.0 times. Remember: Calculate enterprise value first. Then divide by EBITDA.
Hint, shown before you answer in practice mode: Common mistake: Using market capitalisation instead of enterprise value in the numerator.
XV-010mediumnumerical
Q6A company’s receivable days rise from 42 to 96 over three years while revenue growth slows and cash flow from operations weakens. Which is the most appropriate conclusion for an analyst?
Option A. Collections have definitely improved as customers now pay faster
Why it is wrong: Rising receivable days indicate slower, not faster, collection.
Option B. The trend is a warning sign that calls for deeper investigation — Correct answer
Option C. Receivable days are unrelated to working-capital or earnings quality
Why it is wrong: Receivables are an important working-capital and earnings-quality indicator.
Option D. The company must be debt-free, since it can afford to wait longer for cash
Why it is wrong: Receivable days do not establish the company’s debt position.
Answer: B. A large increase in receivable days means cash is being collected more slowly relative to sales. When combined with slowing revenue growth and weaker operating cash flow, it is a meaningful warning sign. It does not prove aggressive accounting, but it warrants deeper analysis. Remember: Working-capital ratios should be read together with growth and cash-flow trends.
Hint, shown before you answer in practice mode: Common mistake: Treating a red flag as either conclusive proof of manipulation or as irrelevant.
XV-058hardconceptual
Q7A parent company owns a large operating subsidiary that contributes most of the group’s revenue and also carries significant debt. For analysing the economics of the overall group, which statements are generally more informative?
Option A. Only the parent’s standalone statements, since the parent is the listed company
Why it is wrong: Standalone accounts can omit major subsidiary operations from the group picture.
Option B. Mainly the consolidated statements, checking standalone ones where relevant — Correct answer
Option C. Only the subsidiary’s share price chart, since it earns most of the revenue
Why it is wrong: A chart cannot replace financial statements.
Option D. Only the parent’s dividend announcement, as it shows the cash paid out
Why it is wrong: A dividend announcement is only one piece of information.
Answer: B. Consolidated statements combine the parent and controlled subsidiaries subject to accounting rules and are generally more useful for understanding the economic position of the group. Standalone statements can still be important for legal-entity cash flows, dividends and obligations. Remember: Use consolidated accounts to understand the group, but do not ignore standalone constraints and cash flows.
Hint, shown before you answer in practice mode: Common mistake: Using only whichever statement shows the stronger result.
XV-080mediumconceptual
Q8A manufacturer reports annual cost of goods sold of ₹730 crore and average inventory of ₹100 crore. Its inventory turnover is approximately:
Option A. 3.65 times
Why it is wrong: This is half the correct turnover.
Option B. 5.0 times
Why it is wrong: It is not produced by the stated inputs.
Option C. 7.3 times — Correct answer
Option D. 10.0 times
Why it is wrong: It overstates the turnover.
Answer: C. Inventory turnover = Cost of goods sold ÷ Average inventory = ₹730 crore ÷ ₹100 crore = 7.3 times. Remember: Efficiency ratios relate an income-statement flow over a period to an appropriate average balance-sheet stock.
Hint, shown before you answer in practice mode: Common mistake: Using year-end inventory automatically when average inventory is explicitly provided.
XV-081mediumnumerical
Q9An auditor issues a qualified opinion because sufficient evidence could not be obtained for a material class of inventory. What is the best response by a research analyst?
Option A. Ignore the qualification because the company still reported a profit, so the inventory issue cannot be material
Why it is wrong: Profit does not make a material audit qualification irrelevant.
Option B. Automatically set the company’s value to zero until a later audit gives a clean, unqualified opinion
Why it is wrong: A qualification is serious but does not mechanically imply zero value.
Option C. Replace the audited numbers with management's own unaudited inventory estimate and use it without any further work
Why it is wrong: Substituting unsupported management estimates does not solve the evidence problem.
Option D. Understand the scope and potential financial impact of the qualification before relying on the reported numbers — Correct answer
Answer: D. A qualified audit opinion is a significant input into accounting-quality analysis. The analyst should understand what is qualified, why, how material it may be and whether it affects earnings, assets, cash flows or confidence in controls. It is not automatically proof that the company is worthless. Remember: Audit opinions affect how much confidence an analyst should place in reported financial statements.
Hint, shown before you answer in practice mode: Common mistake: Treating all audit qualifications as either harmless boilerplate or proof of fraud.
XV-082hardconceptual
Q10A company reports revenue of ₹1,200 crore and cost of goods sold of ₹780 crore. Its gross profit margin is:
Option A. 25%
Why it is wrong: It understates the gross profit percentage.
Option B. 30%
Why it is wrong: It is not produced by the stated figures.
Option C. 35% — Correct answer
Option D. 65%
Why it is wrong: 65% is COGS as a percentage of revenue, not gross margin.
Answer: C. Gross profit = ₹1,200 − ₹780 = ₹420 crore. Gross margin = ₹420 ÷ ₹1,200 = 35%. Remember: Gross margin measures gross profit as a percentage of revenue.
Hint, shown before you answer in practice mode: Common mistake: Using cost of goods sold divided by revenue and calling it gross margin.
XV-112mediumnumerical
Q11A company has interest-bearing debt of ₹600 crore and shareholders' equity of ₹400 crore. Ignoring other definitions of debt for this question, its debt-to-equity ratio is:
Option A. 0.67 times
Why it is wrong: This reverses the ratio.
Option B. 1.50 times — Correct answer
Option C. 2.00 times
Why it is wrong: It overstates leverage under the stated definition.
Option D. 2.50 times
Why it is wrong: It is not supported by the inputs.
Answer: B. Debt-to-equity = Debt ÷ Equity = 600 ÷ 400 = 1.50 times. Remember: Always identify the numerator and denominator before computing a leverage ratio.
Hint, shown before you answer in practice mode: Common mistake: Reversing equity and debt.
XV-113mediumnumerical
Q12A company reports profit after tax of ₹180 crore. Depreciation, a non-cash expense, is ₹50 crore and net working capital increases by ₹70 crore. Ignoring all other adjustments, cash flow from operations is:
Option A. ₹160 crore — Correct answer
Option B. ₹200 crore
Why it is wrong: It does not properly reflect both adjustments.
Option C. ₹230 crore
Why it is wrong: This adds depreciation but ignores the working-capital outflow.
Option D. ₹300 crore
Why it is wrong: It overstates operating cash generation.
Answer: A. Starting from profit after tax, add back the non-cash depreciation and subtract the increase in working capital: 180 + 50 − 70 = ₹160 crore. Remember: An increase in working capital generally uses cash. Non-cash depreciation is added back in an indirect cash-flow bridge.
Hint, shown before you answer in practice mode: Common mistake: Adding every accounting adjustment without considering whether it is a cash source or use.
XV-114hardnumerical
Q13A company earns ₹100 crore and has 50 crore shares outstanding, so EPS is ₹2.00. It then issues 10 crore additional shares, and assume profit remains ₹100 crore. What happens to EPS?
Option A. It rises to ₹2.50
Why it is wrong: More shares with unchanged profit do not increase EPS.
Option B. It stays at ₹2.00
Why it is wrong: EPS changes because the share count changes.
Option C. It rises to ₹6.00
Why it is wrong: This is not supported by the arithmetic.
Option D. It falls to about ₹1.67 — Correct answer
Answer: D. After the issue, shares outstanding become 60 crore. With unchanged profit, EPS = ₹100 crore ÷ 60 crore = approximately ₹1.67. Remember: Equity issuance can dilute per-share earnings if incremental profit does not offset the larger share count.
Hint, shown before you answer in practice mode: Common mistake: Looking only at total profit and ignoring changes in shares outstanding.
XV-115mediumnumerical
Q14Why should an analyst read the notes to accounts rather than rely only on the face of the financial statements?
Option A. Notes contain only marketing material and can be ignored
Why it is wrong: Notes are part of the financial reporting package and can contain material information.
Option B. Notes are relevant only when a company reports a loss for the year
Why it is wrong: They matter for profitable and loss-making companies alike.
Option C. Notes explain policies, commitments and contingencies behind the numbers — Correct answer
Option D. Notes automatically prove whether a stock is undervalued by the market
Why it is wrong: Notes inform analysis but do not mechanically determine valuation.
Answer: C. Notes to accounts provide essential context such as accounting policies, segment details, related-party information, commitments, contingencies and breakdowns of financial-statement line items. Remember: Financial statements should be read together with their notes and disclosures.
Hint, shown before you answer in practice mode: Common mistake: Treating headline financial statements as complete without reading the supporting notes.
XV-116mediumconceptual
Q15A company generates annual revenue of ₹900 crore on average total assets of ₹600 crore. Its asset turnover is:
Option A. 1.50 times — Correct answer
Option B. 0.67 times
Why it is wrong: This reverses the ratio.
Option C. 2.00 times
Why it is wrong: It overstates asset efficiency.
Option D. 3.00 times
Why it is wrong: It is not supported by the figures.
Answer: A. Asset turnover = Revenue ÷ Average total assets = 900 ÷ 600 = 1.50 times. Remember: Asset turnover measures how much revenue is generated per unit of assets.
Hint, shown before you answer in practice mode: Common mistake: Reversing assets and revenue.
XV-117mediumnumerical
Q16Company A reports a much higher net margin than peers, but its profit includes a large one-time gain from sale of land. For a meaningful operating peer comparison, an analyst should:
Option A. Conclude immediately that Company A has structurally superior margins
Why it is wrong: A one-off gain can distort reported profitability.
Option B. Separate the one-time gain and compare normalised operating performance — Correct answer
Option C. Add the same imaginary gain to every peer
Why it is wrong: Inventing adjustments for peers is not valid analysis.
Option D. Ignore the income statement and compare only share prices
Why it is wrong: Share price alone does not resolve operating comparability.
Answer: B. Peer analysis should adjust for material non-recurring items where appropriate so that operating economics are compared on a more like-for-like basis. Remember: Good peer comparison requires consistent definitions and adjustment for material non-recurring items.
Hint, shown before you answer in practice mode: Common mistake: Comparing headline ratios without checking what drives them.
XV-118hardconceptual
Company Analysis – Financial Analysis: common questions
How many practice questions are there on Company Analysis – Financial Analysis?
16 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 16 practice topics for NISM Series XV, which has 150 questions in total.
Are these real NISM Series XV questions on Company Analysis – Financial Analysis?
No. LearnNifty wrote every question from NISM's public syllabus. NISM does not publish its question bank, so nobody can offer you the real paper. Use these questions to check that an idea has gone in. Use the official NISM workbook to see what is examined.
Does negative marking apply to NISM Series XV?
Yes. NISM takes off 25% of a question's marks for a wrong answer. On a 1-mark question that is 0.25 marks off. A blank question earns nothing and loses nothing, so a wrong guess costs marks on this paper. Timed practice here uses the same rule.
Are these practice questions kept up to date?
Each question is written against the rules printed on this page, last checked on 5 September 2026. A Budget or a SEBI circular can change a rate, a lot size or an expiry day. If one of those rules changes before your exam, treat the questions that use it as out of date. Then check NISM's current workbook.
Corporate Actions
7 questions on Corporate Actions. Its quiz opens on that unit.
Open Corporate Actions