Try 10 focused Series 162 questions on Data and Calculation Review, with explanations, then continue with the full Securities Prep practice test.
Series 162 Data and Calculation Review questions help you isolate one part of the FINRA outline before returning to a mixed practice test. The questions below are original Securities Prep practice items aligned to this topic and are not copied from any exam sponsor.
| Item | Detail |
|---|---|
| Exam | FINRA Series 162 |
| Official topic | Function 1 — Review the Content of the Report to Assess the Accuracy, Consistency, and Sources of Data and Calculations Included in the Report |
| Blueprint weighting | 32% |
| Questions on this page | 10 |
A supervisory analyst is reviewing an estimate-change memo and is close to approving it, but one reconciliation is still missing.
Prior 2026 forecast:
Net income = $200 million
Diluted EPS = $2.00
Revision drivers disclosed:
Operating income +$30 million
Interest expense +$10 million
Tax rate unchanged at 25%
All other items unchanged
Revised report conclusion:
2026 diluted EPS increases to $2.24
Before deciding whether the EPS change is mathematically consistent with the disclosed line-item changes, what should the supervisory analyst confirm first?
Best answer: C
Explanation: EPS of $2.24 is only possible if diluted shares fall from the implied 100 million to about 96 million, so the denominator bridge must be verified.
The disclosed revisions increase after-tax earnings by only $15 million, taking net income from $200 million to $215 million. A reported EPS of $2.24 therefore requires a lower diluted share count than before, so the supervisory analyst should confirm the share-count reconciliation first.
The core issue is calculation integrity between the earnings bridge and diluted EPS. With all other items unchanged, the disclosed revisions add $20 million pretax and $15 million after tax, so revised net income should be $215 million. Because prior EPS of $2.00 on $200 million implies 100 million diluted shares, the reported $2.24 EPS cannot be validated unless the model assumes fewer diluted shares, such as from repurchases or reduced dilution.
\[ \begin{aligned} \text{Pretax change} &= 30 - 10 = 20 \\ \text{After-tax change} &= 20 \times (1 - 0.25) = 15 \\ \text{Revised net income} &= 200 + 15 = 215 \\ \text{Shares for } 2.24\text{ EPS} &= 215 / 2.24 \approx 96.0 \end{aligned} \]That is the missing reconciliation to confirm before moving on to broader valuation or sourcing questions.
A research report states that an issuer’s annual dividend is sustainable. In review, the supervisory analyst compares dividend per share with forecast EPS and free cash flow per share. This comparison is primarily an assessment of the issuer’s:
Best answer: A
Explanation: Dividend coverage tests whether earnings and cash generation are sufficient to support the stated dividend per share.
The best term is dividend coverage because the review is asking whether the company’s dividend is supported by both earnings and cash generation. Comparing dividend per share with EPS and free cash flow per share is a support test, not a market-price or reinvestment measure.
Dividend coverage is the concept used when a supervisory analyst checks whether a stated dividend is actually supported by the company’s financial capacity to pay it. In this stem, the report’s dividend-per-share discussion must align with both forecast EPS and free cash flow per share, so the key issue is whether earnings and cash generation cover the dividend.
A payout ratio is related, but it is narrower because it usually focuses on dividends as a share of earnings. Dividend coverage is the better term when the review explicitly includes cash generation support as well as EPS consistency. That makes it the most complete label for this supervisory analyst check.
The key takeaway is that sustainable dividend language should reconcile not just to reported or forecast earnings, but also to cash available to fund the dividend.
A supervisory analyst compares two draft valuation summaries for recent acquirers:
Report A
- Price target: 12x 2026 EV/EBITDA
- Forecast note: acquired-intangible amortization rises after the deal
- EBITDA table makes no separate adjustment for that amortization
Report B
- Rating text: price target based on 15x 2026 EPS excluding acquired-intangible amortization
- Valuation table: target shown as 15x 2026 GAAP EPS from the estimate table
- No reconciliation between GAAP EPS and adjusted EPS
Which review conclusion is most appropriate?
Best answer: A
Explanation: Report B mismatches its stated adjusted-EPS valuation basis with a GAAP EPS denominator and provides no bridge between the two.
The supervisory issue is internal consistency between the metric described and the metric actually used. Report B says the price target is based on EPS excluding acquired-intangible amortization, but the valuation table applies the multiple to GAAP EPS with no reconciliation.
When a report discusses adjusted earnings treatment for acquisition accounting, that treatment must be consistent across the narrative, estimate tables, and valuation support. If the analyst says the price target is based on EPS excluding acquired-intangible amortization, the valuation table must also use that adjusted EPS or provide a clear bridge from GAAP EPS.
Report A does not show the same problem. EBITDA is measured before amortization, so rising acquired-intangible amortization does not require a separate EBITDA adjustment. Report B, however, labels the valuation basis as adjusted EPS while actually using GAAP EPS. That creates an unsupported price-target denominator and prevents the supervisory analyst from confirming the calculation basis.
The key takeaway is that even noncash acquisition-accounting items must be handled consistently when they affect the stated valuation metric.
A supervisory analyst reviews a draft report on UtilityCo. The report forecasts 2025 diluted EPS of $2.00, dividends per share of $1.20, and average diluted shares of 100 million. The cash flow section forecasts cash from operations of $180 million and capex of $80 million. The dividend discussion states, “The dividend is well covered by both earnings and free cash flow.” Which supervisory review comment is INCORRECT?
Best answer: C
Explanation: EPS coverage and free-cash-flow coverage are separate tests, and projected free cash flow of $1.00 per share does not cover the $1.20 dividend.
The inaccurate comment is the one treating EPS coverage as proof of free-cash-flow coverage. EPS of $2.00 does cover the $1.20 dividend, but forecast free cash flow is only $100 million, or $1.00 per share, so the report’s cash-coverage claim is inconsistent with its own forecasts.
This item tests per-share consistency between dividend discussion, EPS support, and cash-generation support. A report may argue that a dividend is covered by earnings, by free cash flow, or by both, but each claim must reconcile to the underlying figures. Here, the earnings payout ratio is 60% because dividends per share of $1.20 are 60% of diluted EPS of $2.00, so the earnings coverage statement is numerically reasonable. But projected free cash flow is only $100 million after subtracting $80 million of capex from $180 million of cash from operations; divided by 100 million shares, that is $1.00 per share. Since $1.00 is below the $1.20 dividend, the report cannot also claim free-cash-flow coverage without additional support or revised wording. The key trap is assuming earnings coverage automatically proves cash coverage.
A supervisory analyst reviews a draft report dated September 18, 2026. The report states that all market data are as of the report date close.
Share price: $64.00
Annual indicated dividend: $2.24 per share
Shares outstanding used in the report: 250 million
Draft line: Dividend yield 3.1%; market capitalization $15.0 billion
Which replacement line is internally consistent with the report date data?
Best answer: A
Explanation: Using the report-date price, dividend yield is \(2.24 / 64.00 = 3.5\%\) and market capitalization is \(64.00 \times 250\) million = \(16.0\) billion.
The internally consistent replacement must recalculate both figures from the report-date share price. \(2.24 / 64.00 = 3.5\%\) for dividend yield, and \(64.00 \times 250\) million = \(16.0\) billion for market capitalization.
For market-data verification, the supervisory analyst should confirm that any reported yield and market capitalization reconcile to the same report-date share price. Here, the annual indicated dividend of \(2.24\) per share and the report-date price of \(64.00\) imply a dividend yield of \(3.5\%\). The stated share count of 250 million implies a market capitalization of 16.0 billion.
Because the draft line shows 3.1% and $15.0 billion, it is inconsistent with the data in the excerpt. The key review step is to recompute both figures from the current price before approving the report.
A supervisory analyst is reviewing a price-target memo on a U.S. software issuer that reports under U.S. GAAP. The analyst selected U.S., European, and Japanese peers and applied their median 2026 EV/EBITDA multiple.
Exhibit: Support memo excerpt
Peer EBITDA: converted to USD using current FX
Peer net debt: latest reported balance sheet amounts
Accounting notes: one European peer reports under IFRS and capitalizes development costs; one Japanese peer reports under local GAAP
Translation basis: no explanation of income-statement versus balance-sheet rates
Comparability memo: none attached
Before approval, which missing review item is most important?
Best answer: B
Explanation: Foreign-peer multiples may be distorted unless currency translation and local accounting differences are reconciled to a comparable basis.
The key deficiency is the lack of comparability support for foreign peers. Because the valuation uses peer EV/EBITDA multiples across currencies and accounting regimes, the supervisory analyst needs a reconciliation showing that EBITDA and net debt were translated and adjusted on a consistent basis before approving the report.
This item tests comparability review when foreign peers are used in a valuation. EV/EBITDA is only meaningful if the numerator and denominator are built on comparable definitions. Here, the support file mixes foreign issuers, states that EBITDA was converted using current FX, uses latest balance-sheet debt, and notes IFRS and local-GAAP reporting differences, but it provides no bridge showing how those items were normalized.
The supervisory analyst should require support that addresses:
Extra market color or sensitivity analysis can improve the report, but they do not solve the core accuracy problem: the peer inputs may not be comparable.
A supervisory analyst reviews a report that raises the issuer’s 2026 revenue estimate based on management commentary. Which action is best supported by the exhibit before the report is approved?
Exhibit: Estimate-change support note
Report change:
- 2026 revenue estimate: +7%
Stated support in report:
- "Management indicated on the March investor presentation that
service gross margin should reach the mid-40% range next year."
Attached source support:
- Investor presentation, slide 18:
"Long-term service gross margin target: mid-40%"
- Conference call transcript citation: none
- Press-release guidance: none
Best answer: D
Explanation: The exhibit shows a time-horizon mismatch, so the key credibility check is whether management actually provided next-year guidance rather than only a long-term target.
The attached support does not match the report’s wording. The report claims management gave next-year margin guidance, but the cited investor presentation supports only a long-term target, so the supervisory analyst should verify the actual time horizon before approval.
The core issue is source credibility in context. A public investor presentation can be a valid management source, but it must support the exact statement used in the report. Here, the report says management indicated service gross margin would reach the mid-40% range next year, while the attached slide says only long-term target. With no conference call transcript or press-release guidance showing a next-year statement, the estimate change lacks matching source support.
Before approving the report, the supervisory analyst should require verification that management actually provided period-specific guidance for the forecast year or require the report language and model support to be revised. The key takeaway is that accurate attribution includes the metric, wording, and time horizon, not just the fact that the source is public.
A supervisory analyst reviews a retailer report with a margin-recovery thesis and an EV/EBITDA price target. The analyst excludes a $14 million current-year store-closing charge from EBITDA, but leaves a similar $12 million charge in the prior-year base period even though both arose from the same rationalization program and are described as nonrecurring in company filings. Which action best aligns with valuation-review standards?
Best answer: B
Explanation: Comparable-period adjustments should be applied consistently; otherwise the report selectively improves one period’s results.
Comparability adjustments should make periods more consistent, not selectively improve one period. Because both charges come from the same program and are treated as nonrecurring, the supervisory analyst should require a bridge that uses the same adjustment policy across periods or specific support for different treatment.
The core issue is whether the adjustment set improves analytical consistency and helps the report reflect sustainable cash flow on a like-for-like basis. Here, the analyst excludes the current-year store-closing charge but leaves the prior-year charge in the baseline, even though both charges arise from the same program. That selective treatment overstates apparent EBITDA recovery and weakens the reasonable basis for the valuation conclusion. A supervisory analyst should require a reported-to-adjusted reconciliation for each period used in the thesis and apply one adjustment policy to similar items across periods. If treatment differs, the report needs documented evidence that the items are economically different, not just differently presented. Source traceability is necessary, but good sourcing alone does not cure an inconsistent valuation bridge.
A supervisory analyst is reviewing an equity research report that raises the issuer’s price target and includes a third-party industry-demand chart to support the revenue forecast. The chart is clearly attributed to a trade publication, and the analyst has verified the figures, but the review file does not show permission to reproduce the chart in the published report. What is the best supervisory analyst response before approving the report?
Best answer: B
Explanation: Attribution and accuracy do not establish a right to republish third-party material, so approval should wait until permission is documented or the chart is removed.
The decisive issue is reproduction permission, not just attribution or analytical usefulness. A supervisory analyst should not approve a report containing third-party material unless the firm has established the right to reproduce it or removes that material from the report.
In supervisory review, third-party material included in a published report must be both properly attributed and authorized for reproduction. Here, the chart is named and the numbers were checked, but the file lacks evidence that the firm may republish the chart. That is a report-approval deficiency even if the chart supports a reasonable revenue forecast and price target.
The proper response is to withhold approval until permission is documented or the chart is removed from the report. The closest wrong approach is relying on attribution and validation alone; those do not cure the missing reproduction right.
A supervisory analyst reviews a research update reiterating Buy with a $48 price target. The report cites MD&A language from the issuer’s Form 10-Q that gross-margin pressure is “transitory” and uses that statement to support 150bp margin expansion next year. In the same filing, a footnote states current-quarter cost of sales benefited by 180bp from a nonrecurring warranty reserve adjustment that is not expected to recur, but the report does not mention it. What is the best next step before approving the report?
Best answer: D
Explanation: The omitted footnote may weaken the margin-expansion thesis, so the analyst must reconcile the sources and quantify any effect before approval.
The key review issue is an unresolved inconsistency within the same filing. Before approval, the supervisory analyst should require the analyst to reconcile the favorable MD&A narrative with the nonrecurring footnote item and show whether forecasts and the price target still have a reasonable basis.
A supervisory analyst must confirm that cited support is complete and internally consistent. MD&A may describe management’s operating narrative, but a related footnote can change how reported results should be interpreted. Here, the report uses MD&A language to support future margin expansion while ignoring a same-filing disclosure showing current-quarter margins were helped by a 180bp nonrecurring reserve adjustment. That omission could overstate normalized profitability.
The proper next step is to require the analyst to:
Approving first, changing the rating immediately, or re-running the model before resolving the source conflict skips the required review sequence.
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