Free CISI CWM FM Practice Questions: Accounts, ESG, Ratios, and Fintech

CISI means Chartered Institute for Securities & Investment. CWM means Chartered Wealth Manager, and this page is for the Financial Markets paper. Use this focused CISI CWM Financial Markets page as a short practice test for Accounts, ESG, Ratios, and Fintech. The items are original Finance Prep sample exam questions built for scenario-based practice, not trivia, puzzle questions, official CISI questions, copied live-exam content, or exam dumps.

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These are original Finance Prep practice questions aligned to this topic area. They are not official CISI questions, copied live-exam content, or exam dumps. Use them to preview question style and explanation depth before continuing with topic drills, mixed sets, and timed mock exams in Finance Prep.

Question 1

Topic: Company Accounts, ESG Reporting, Ratios, and Fintech Analysis

A UK equity analyst is reviewing a listed manufacturer after a year in which investors have become more focused on dividend sustainability.

Issuer facts for the year just ended:

• Profit attributable to ordinary shareholders: £72 million
• The profit includes a £12 million post-tax exceptional gain on disposing of a surplus site.
• Weighted-average ordinary shares in issue: 240 million
• Ordinary dividends declared for the year: £36 million
• Share price at the review date: 500p
• There are no preference shares and no dilutive instruments.

For the analyst’s note, exceptional gains should be excluded when calculating adjusted earnings. Which assessment is correct?

• A. Basic EPS is 25p; adjusted EPS is 30p; adjusted earnings yield is 6.0%; dividend yield is 3.0%; adjusted dividend cover is 2.0 times, so the disposal gain improves recurring EPS.
• B. Basic EPS is 30p; adjusted EPS is 30p; adjusted earnings yield is 6.0%; dividend yield is 3.0%; adjusted dividend cover is 2.0 times, so the exceptional gain supports the dividend assessment.
• C. Basic EPS is 30p; adjusted EPS is 25p; adjusted earnings yield is 3.0%; dividend yield is 5.0%; adjusted dividend cover is about 0.6 times, so dividends exceed adjusted earnings.
• D. Basic EPS is 30p; adjusted EPS is 25p; adjusted earnings yield is 5.0%; dividend yield is 3.0%; adjusted dividend cover is about 1.7 times, so the dividend is covered with less headroom than the unadjusted figure suggests.

Best answer: D

What this tests: Company Accounts, ESG Reporting, Ratios, and Fintech Analysis

Explanation: EPS is profit attributable to ordinary shareholders divided by the weighted-average ordinary shares. Basic EPS is £72 million / 240 million = £0.30, or 30p. Adjusted EPS excludes the post-tax exceptional gain: (£72 million - £12 million) / 240 million = 25p. Earnings yield compares earnings per share with the share price, so adjusted earnings yield is 25p / 500p = 5.0%. Dividend per share is £36 million / 240 million = 15p, giving a dividend yield of 15p / 500p = 3.0%. Dividend cover is earnings divided by dividends, or EPS divided by dividend per share. On adjusted earnings it is £60 million / £36 million = about 1.7 times.

• Treating the disposal gain as recurring leaves adjusted EPS at 30p and overstates sustainable earnings.
• Swapping basic and adjusted EPS incorrectly treats the exceptional gain as improving recurring earnings.
• Swapping the earnings yield and dividend yield reverses the price comparisons, and dividend cover should be earnings divided by dividends.

Profit including the exceptional gain gives 30p EPS, while adjusted profit of £60 million gives 25p adjusted EPS and 1.7 times adjusted dividend cover.

Question 2

Topic: Company Accounts, ESG Reporting, Ratios, and Fintech Analysis

An investment committee is reviewing a UK-listed logistics company after higher interest rates widened its credit spread. The portfolio holds both ordinary shares and a small position in the company’s 2029 bond.

Case extract:

• Revenue and reported profit increased during the year.
• Management says working capital absorbed cash.
• Net debt increased after a warehouse expansion.
• The committee wants the analyst to separate performance, financial position, cash generation, and supporting accounting detail before discussing valuation.

Which annual report structure should the analyst use for the briefing?

• A. Use the income statement for period profit or loss, the statement of financial position for assets, liabilities and equity at the reporting date, the cash-flow statement for operating, investing and financing cash movements, and the notes for policies and supporting detail.
• B. Use the notes as the primary record of transactions, the income statement for covenant compliance, the cash-flow statement for share ownership, and the statement of financial position only for dividend policy.
• C. Use the statement of financial position for the year’s trading result, the income statement for cash receipts and payments, the cash-flow statement for assets and liabilities, and the notes only for ESG narrative.
• D. Use the cash-flow statement for profitability after depreciation, the statement of financial position for market value of equity, the income statement for net debt, and the notes only for the audit opinion.

Best answer: A

What this tests: Company Accounts, ESG Reporting, Ratios, and Fintech Analysis

Explanation: The primary statements serve different purposes. The income statement reports financial performance over a period, including revenue, expenses and profit or loss. The statement of financial position is a point-in-time snapshot of assets, liabilities and equity, so it is central to assessing leverage, working capital and financial structure. The cash-flow statement explains cash movements during the period, usually classified as operating, investing and financing flows, which is important when profit has risen but cash generation is weak. The notes support the primary statements by setting out accounting policies, estimates, breakdowns, maturities, contingencies and other detail needed to interpret the numbers. In the case extract, the analyst needs all four components to distinguish profit growth from balance-sheet pressure and cash-flow strain.

• Treating the statement of financial position as a trading-result statement reverses its purpose; it is a position statement at a reporting date.
• The cash-flow statement is not a measure of accounting profit after depreciation; it focuses on cash movements and their classification.
• The notes supplement and explain the primary statements; they are not the primary transaction record or limited to the audit opinion.

This correctly matches each core financial statement and the notes to its purpose in analysing the issuer.

Question 3

Topic: Company Accounts, ESG Reporting, Ratios, and Fintech Analysis

An analyst is comparing a listed technology group with peers that expense development costs as incurred. The group reports results for the year ended 31 December 2026.

Notes to the accounts:

• The group capitalised £12.0m of current-year development expenditure. Amortisation of previously capitalised development costs included in expenses was £2.0m.
• It extended estimated useful lives of plant. Depreciation charged was £10.0m; under the previous useful-life estimate it would have been £16.0m.
• Before the accounts were approved, a customer owing £4.0m at the year end entered liquidation. The directors state the receivable was impaired at the balance-sheet date, but the reported profit above has not yet been adjusted.
• The tax rate on all adjustments is 25%.

If the analyst adjusts earnings to expense development as incurred, retain comparability with the previous depreciation estimate, and reflect the adjusting post-balance-sheet event, what adjusted EPS should be used?

• A. 33.8p
• B. 30.0p
• C. 27.5p
• D. 40.0p

Best answer: C

What this tests: Company Accounts, ESG Reporting, Ratios, and Fintech Analysis

Explanation: Accounting policies and estimates can make reported earnings less comparable even where the accounting treatment is permitted. Capitalising current development rather than expensing it raises current profit by current costs not recognised, partly offset by amortisation already charged: £12.0m - £2.0m = £10.0m pre-tax, or £7.5m after tax. The longer useful life lowers depreciation by £16.0m - £10.0m = £6.0m pre-tax, or £4.5m after tax. A post-balance-sheet event that confirms a condition existing at the balance-sheet date is an adjusting event, so the £4.0m receivable impairment reduces profit by £3.0m after tax. Adjusted earnings are £48.0m - £7.5m - £4.5m - £3.0m = £33.0m. EPS is £33.0m / 120.0m = £0.275, or 27.5p.

• 30.0p adjusts for development capitalisation and the depreciation estimate but omits the receivable impairment, even though the event confirms a year-end condition.
• 33.8p adjusts only for development capitalisation and misses the estimate change and the adjusting post-balance-sheet event.
• 40.0p is the unadjusted reported EPS and ignores the comparability effects of policy, estimates and subsequent evidence.

Adjusted profit is £33.0m after the three after-tax reductions, giving £33.0m divided by 120.0m shares.

Question 4

Topic: Company Accounts, ESG Reporting, Ratios, and Fintech Analysis

An investment platform is reviewing a fund factsheet that states: “Portfolio weighted average carbon intensity fell by 40% over the year.” Weighted average carbon intensity (WACI) is calculated as portfolio weight multiplied by emissions intensity, summed across holdings.

The factsheet footnote says the data provider changed methodology this year and now excludes non-disclosing issuers rather than estimating them.

Which conclusion is most justified by the figures?

• A. The fund clearly became more carbon intensive because averaging 96 and 300 gives 198, which is higher than last year’s 160.
• B. There is a greenwashing risk because the methodology change excludes non-disclosing holdings; using another provider’s estimates gives a current WACI of about 157, not 96.
• C. There is little disclosure risk because the reported WACI fell by 40%; excluded holdings should be treated as zero until they publish data.
• D. The main risk is ordinary market volatility because the figures show the same holdings must have changed price rather than emissions data quality.

Best answer: B

What this tests: Company Accounts, ESG Reporting, Ratios, and Fintech Analysis

Explanation: ESG metrics are highly sensitive to coverage, estimation methods and provider methodology. The factsheet compares last year’s portfolio figure with this year’s covered-only figure, so the trend is not like-for-like. Reinstating the missing 30% using the second provider’s estimate gives 157.2 tCO2e/£m revenue. Compared with 160 last year, that is a reduction of only 2.8/160, about 1.8%, not 40%. The apparent improvement is mainly caused by excluding non-disclosing issuers and changing methodology. If promoted without clear disclosure of coverage, estimation and provider differences, the claim creates a greenwashing risk.

• Treating excluded holdings as zero is not conservative; it may reward incomplete issuer disclosure and overstate ESG improvement.
• Market-price volatility is not evidenced; the decisive facts are data coverage, estimation and methodology.
• A simple unweighted average of provider figures ignores portfolio weights and does not produce a meaningful WACI.
• Continuing to use the same fund name or benchmark does not solve comparability problems when the ESG metric methodology changes.

The adjusted figure is 0.70 × 96 + 0.30 × 300 = 157.2, so the advertised 40% fall is not a like-for-like portfolio improvement.

Question 5

Topic: Company Accounts, ESG Reporting, Ratios, and Fintech Analysis

An analyst is comparing reported growth for two listed companies in the same sector. Revenue growth is measured as current-year revenue minus prior-year revenue, divided by prior-year revenue. Operating margin is operating profit divided by revenue. Cash conversion is operating cash flow divided by operating profit.

Which conclusion best distinguishes growth quality from growth quantity?

• A. The two companies have equal growth quality because both report the same £100m increase in revenue.
• B. Marden’s growth is higher quality because current revenue is £600m, so the lower cash flow is less relevant than scale.
• C. Marden’s growth is higher quality because the £100m revenue increase is the same and its lower profit reflects investment in capacity.
• D. Riverton’s growth is higher quality because revenue growth matches Marden’s at 20%, but its margin and cash conversion are stronger.

Best answer: D

What this tests: Company Accounts, ESG Reporting, Ratios, and Fintech Analysis

Explanation: Growth quantity measures how much a line item has increased, such as revenue growth. Growth quality considers whether that growth is profitable, cash-generative and sustainable. Here, both companies increased revenue from £500m to £600m, so revenue growth is \( (600 - 500) / 500 = 20\% \) for both. Riverton’s operating margin improved from 15% to 17%, and its cash conversion is about \( 96 / 102 = 94\% \). Marden’s margin fell from 16% to 13%, and its cash conversion is about \( 44 / 78 = 56\% \). The figures therefore support Riverton as having higher-quality growth, despite identical top-line growth quantity.

• Treating the same £100m revenue increase as equal quality confuses growth quantity with growth quality.
• Inferring that Marden’s lower profit reflects productive reinvestment is unsupported by the figures.
• Emphasising revenue scale ignores margin deterioration and weak operating cash conversion.

Both companies have the same revenue growth quantity, while Riverton shows better profitability and cash-backed earnings.

Question 6

Topic: Company Accounts, ESG Reporting, Ratios, and Fintech Analysis

A wealth manager is reviewing a UK-listed company’s statement before updating a client note.

Company facts:

• Forecast profit after tax for the year: £60 million.
• Planned ordinary cash dividend: £24 million in total.
• Current ordinary shares in issue: 120 million.
• A fully subscribed 1-for-4 rights issue will create 30 million new ordinary shares.
• No income from the cash raised is included in the profit forecast.
• Immediately after the rights issue, each ordinary share will be split into two shares, and all shares will rank equally for the dividend.

For a simple pro forma post-action measure, ignoring time weighting, transaction costs and tax, which statement is the single best interpretation of the effect on EPS and DPS?

• A. EPS remains 50p and DPS remains 20p because neither the rights issue nor the share split changes total profit or the total dividend declared.
• B. EPS falls to 20p and DPS falls to 8p because the same profit and total dividend are spread over 300 million shares after the rights issue and split.
• C. EPS rises and DPS is unchanged because the rights issue increases equity capital and the total dividend budget has not been reduced.
• D. EPS falls to 40p and DPS falls to 16p because the rights issue is dilutive, but the subsequent share split should be ignored for per-share measures.

Best answer: B

What this tests: Company Accounts, ESG Reporting, Ratios, and Fintech Analysis

Explanation: Per-share measures depend on both the numerator and the number of shares used in the denominator. Here, profit after tax and total dividends are unchanged, but the share count changes. The 1-for-4 rights issue adds 30 million shares to the existing 120 million, giving 150 million shares. The 2-for-1 split then doubles the number of shares to 300 million. On the stated simple pro forma basis, EPS is £60 million divided by 300 million shares, or 20p. DPS is £24 million divided by 300 million shares, or 8p. The rights issue raises capital and the split changes the unit count, but neither creates additional forecast profit or a larger dividend pool in the facts provided.

• Keeping EPS at 50p and DPS at 20p ignores the increase in the number of shares.
• Using 40p EPS and 16p DPS captures the rights issue but incorrectly ignores the 2-for-1 split.
• Assuming EPS rises treats the rights proceeds as if they immediately generate profit, which is specifically excluded.

The rights issue increases shares to 150 million and the 2-for-1 split doubles that to 300 million, so £60 million profit and £24 million dividends give EPS of 20p and DPS of 8p.

Question 7

Topic: Company Accounts, ESG Reporting, Ratios, and Fintech Analysis

A discretionary portfolio holds a small position in 18-month senior unsecured notes issued by Meridian Homeware plc, a UK retailer. The analyst is updating a liquidity note after weaker consumer spending and tighter bank lending conditions.

Use these definitions:

• Current ratio = current assets / current liabilities.
• Quick ratio = (cash + trade receivables) / current liabilities.

Latest statement extract:

Prior year ratios were a current ratio of 1.70 and a quick ratio of 0.90. Which liquidity assessment should be included in the monitoring note?

• A. Current ratio is 1.34 and quick ratio is 1.34; inventory is already a current asset, so no adjustment is needed.
• B. Current ratio is 1.34 and quick ratio is 0.62; total current assets cover current liabilities, but cash and receivables do not.
• C. Current ratio is 1.97 and quick ratio is 0.91; short-term bank borrowing should be excluded because it is not a trading liability.
• D. Current ratio is 0.75 and quick ratio is 1.61; liquidity appears stronger on the quicker measure than on the broader measure.

Best answer: B

What this tests: Company Accounts, ESG Reporting, Ratios, and Fintech Analysis

Explanation: The current ratio compares total current assets with total current liabilities. Meridian has current assets of £134m and current liabilities of £100m, giving 1.34 times. The quick ratio is narrower because inventories may be slow to sell or may require discounting, especially in weaker consumer markets. Cash plus receivables are £62m, so the quick ratio is 0.62 times. Both measures have deteriorated from the prior year. For a short-dated unsecured bond holding, this does not prove default, but it supports closer monitoring of working-capital risk: the issuer has more current assets than current liabilities in total, yet depends on inventory realisation, receivable collection, or continued financing to meet near-term obligations.

• Treating inventory as a quick asset misses the purpose of the acid-test measure, which excludes stock because it may not be readily converted into cash.
• Excluding short-term bank borrowings understates current liabilities because the borrowing is due in the short term.
• Inverting the ratios reverses their interpretation and does not follow the stated definitions.

£134m divided by £100m gives a current ratio of 1.34, while (£18m + £44m) divided by £100m gives a quick ratio of 0.62.

Question 8

Topic: Company Accounts, ESG Reporting, Ratios, and Fintech Analysis

A wealth manager holds both the ordinary shares and a small corporate bond position in Haldane Components plc. UK manufacturing demand has been weak and borrowing costs have remained elevated. The analyst is asked to identify structural changes from the issuer’s common-size accounts before considering valuation.

All income statement lines are shown as a percentage of revenue. All statement of financial position lines are shown as a percentage of total assets.

Which analyst conclusion is best supported by the common-size analysis?

• A. Haldane has become more asset- and inventory-intensive, with a larger share of assets funded by borrowings, while profit margins have weakened.
• B. Haldane has moved to a more asset-light model because trade receivables have fallen sharply as a percentage of total assets.
• C. Haldane’s capital structure is broadly unchanged because trade payables and other liabilities remain at 20% of total assets.
• D. Haldane’s operating efficiency has improved because operating expenses remain below one quarter of revenue in both years.

Best answer: A

What this tests: Company Accounts, ESG Reporting, Ratios, and Fintech Analysis

Explanation: Common-size statements convert each line into a percentage of a common base, making structural shifts easier to see across periods. Here, the income statement shows margin pressure: gross profit falls from 38% to 34% of revenue, operating expenses rise from 22% to 24%, and profit before tax falls from 14% to 5%. Finance costs also take a larger share of revenue. The statement of financial position shows a heavier asset base, with non-current assets rising from 48% to 60% and inventories from 18% to 24% of total assets. Funding has also changed: equity falls from 55% to 38% while borrowings rise from 25% to 42%. The combined picture is not just weaker trading; it is a more capital-intensive and more debt-funded business structure.

• The asset-light interpretation overweights the fall in trade receivables and ignores the larger increases in non-current assets and inventories.
• The operating-efficiency interpretation ignores the fall in gross margin, the rise in operating expenses as a share of revenue, and the weaker operating margin.
• The unchanged-capital-structure interpretation focuses on stable trade payables but misses the major shift from equity funding to borrowings.

The common-size movements show non-current assets, inventories, borrowings and finance costs rising as a share of their bases, while operating and pre-tax margins fall.

Question 9

Topic: Company Accounts, ESG Reporting, Ratios, and Fintech Analysis

An investment committee is reviewing whether to keep Greystone Packaging plc on the approved list for an ESG-screened UK equity sleeve.

Case extract:

• Market context: Several institutional clients are questioning environmental claims by industrial issuers after a sector-wide rise in energy costs.
• Issuer statement:

“Our carbon intensity fell by 35% in 2025, confirming that Greystone is a Paris-aligned packaging leader.”

• Disclosure notes:
  • The 2025 report excludes outsourced logistics and a recently acquired plant that were included in the 2024 base year.
  • Scope 3 emissions are described as “not currently measured”.
  • No reconciliation is provided between the old and new emissions methodology.
• External ESG data:
  • Provider A upgraded Greystone because reported carbon intensity improved.
  • Provider B downgraded Greystone because supply-chain emissions and methodology changes are not comparable.

Which assessment best identifies the ESG analysis risk before relying on the improved score?

• A. A simple average of Provider A and Provider B scores removes the need for further issuer-specific analysis.
• B. The upgraded score should take priority because reported environmental metrics are always more relevant than provider concerns.
• C. The main risk is that rising energy costs will reduce profit margins, not that ESG information is incomplete.
• D. The reported improvement may be unreliable because the issuer changed methodology, omitted material emissions, and external providers reach conflicting conclusions.

Best answer: D

What this tests: Company Accounts, ESG Reporting, Ratios, and Fintech Analysis

Explanation: ESG market analysis should not treat one favourable metric or rating as conclusive. A reduction in carbon intensity can indicate progress only if the reporting boundary, methodology and prior-year comparison are clear. Here, the issuer’s claim depends on a changed boundary, excludes emissions sources previously included, does not measure Scope 3 emissions, and provides no reconciliation. That creates incomplete disclosure and methodology-change risk. The “Paris-aligned” wording may also be a greenwashing risk if it is not supported by transparent evidence. Divergent external ESG provider outputs are not automatically errors; providers may use different data sources, coverage, weightings and assumptions. The prudent assessment is to investigate the source data and methodology before relying on the improved score.

• Prioritising the upgrade assumes the reported metric is comparable, but the facts show changed boundaries and missing emissions.
• Focusing only on energy costs addresses financial margin risk rather than ESG data quality and disclosure reliability.
• Averaging provider views can hide rather than resolve differences in methodology, coverage and assumptions.

Changed reporting boundaries, incomplete emissions disclosure, and divergent provider assessments create comparability and greenwashing risk.

Question 10

Topic: Company Accounts, ESG Reporting, Ratios, and Fintech Analysis

A CWM analyst is reviewing two listed packaging companies after a sudden rise in carbon-credit prices and freight costs.

Available information:

• Both companies have similar revenue growth and operating margins in their latest accounts.
• Company A reports annual Scope 3 emissions using supplier questionnaires and PDF narrative disclosures.
• Company B receives supplier emissions and shipment data through automated feeds recorded on a permissioned distributed ledger.
• The ESG data for both companies is currently unaudited.
• A data analytics tool has flagged that Company A’s reported supplier emissions trend is inconsistent with recent port and shipping data.

Which conclusion is the best supported for financial-market analysis?

• A. Fintech tools can improve timeliness, traceability, and anomaly detection, but the analyst must still assess data quality, assurance, and valuation relevance.
• B. Automation removes the need for analyst judgement because models can directly convert ESG data into fair equity values.
• C. Company A’s financial accounts should be ignored because alternative data has identified a possible inconsistency in its ESG reporting.
• D. Company B’s distributed-ledger records should be treated as audited evidence because ledger entries cannot be changed easily.

Best answer: A

What this tests: Company Accounts, ESG Reporting, Ratios, and Fintech Analysis

Explanation: Fintech can materially affect market analysis by widening the data set, increasing the speed of analysis, and helping analysts identify inconsistencies that may affect forecasts, risk premia, and valuation. Automated feeds and distributed ledgers may improve provenance and traceability, while analytics can compare reported ESG metrics with external indicators such as freight or port data. However, these tools do not by themselves make the data audited, complete, or economically material. A permissioned ledger can show how a record was entered and shared, but it cannot guarantee that the underlying supplier measurement was accurate. The appropriate market response is to use the tools to challenge assumptions and refine analysis, not to replace accounting evidence or professional judgement.

• Tamper-resistant ledger records improve traceability, but they are not the same as independent assurance of the underlying measurement.
• Alternative data may flag a reporting risk, but it does not justify ignoring statutory accounts or established financial metrics.
• Automated models can support screening and forecasting, but valuation still requires judgement about materiality, assumptions, and risk.

The facts support using automation, analytics, and distributed-ledger records as useful inputs while recognising that unaudited source data still requires validation and judgement.

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