FINRA Series 87 – Research Analyst Exam Practice Test
Series 87 practice centers on research-analysis judgments involving company disclosures, financial statements, valuation assumptions, and analyst conduct. The available questions sample tasks such as interpreting delayed filings, assessing revenue quality, evaluating convertible-security dilution, and considering how issuer interactions or confidential information affect research work.
Exam overview
About the FINRA Series 87 – Research Analyst Exam
Practice topics connect accounting evidence to valuation and research communication. Questions may ask how rising receivables relative to sales affect an assessment of revenue quality, which earnings measure best reflects ongoing operations in a price-to-earnings analysis, or how debt enters a weighted-average cost of capital estimate. Valuation scenarios also include discounted cash flow price targets, continuing-value assumptions in dividend-discount models, and the effects of currency translation on reported results. Other items test professional judgment: responding to an auditor-related filing delay, evaluating an issuer-sponsored event, protecting confidential material nonpublic information, and identifying disclosures that help readers understand valuation sensitivity. These scenarios call for distinguishing reported facts from assumptions, tracing how an input affects an estimate, and choosing a research response that preserves analytical integrity.
Sample Practice Questions
Review a selection from this exam's published US Practice Tests practice bank.
An equity research analyst learns that the issuer has delayed filing its annual report because of a disagreement with its auditor. What is the most appropriate initial research response?
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Correct answer: BA significant reporting delay may affect the reliability of information and the analyst’s valuation or risk assessment. The analyst should investigate using appropriate sources, reassess the research, and communicate material developments accurately and promptly.
A research analyst receives an invitation from an issuer to attend a company-sponsored event. Which consideration is most appropriate when deciding whether to accept?
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Correct answer: AAnalysts should consider actual or perceived conflicts and comply with applicable firm policies when evaluating issuer-sponsored events or benefits. Attendance does not justify seeking or using material nonpublic information, and an issuer should not control research conclusions.
A company has issued convertible bonds. When assessing potential dilution to common shareholders, which feature is most directly relevant?
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Correct answer: AConvertible securities can become common shares under specified terms. The conversion price and resulting share count are central to estimating potential dilution; other terms may also affect when conversion is economically or contractually possible.
An analyst estimates a company’s common equity value using a price-to-earnings multiple. Which earnings figure is generally the most appropriate denominator when the multiple is intended to reflect ongoing operations?
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Correct answer: AA valuation multiple is only meaningful when its denominator is defined and relevant to the valuation period. A supportable normalized earnings estimate can help separate recurring performance from unusual items, with assumptions and limitations made clear.
An analyst is estimating a company’s weighted-average cost of capital for a valuation model. Which treatment of debt is generally most appropriate?
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Correct answer: BFor a standard WACC calculation, the cost of debt is generally adjusted for the tax benefit of deductible interest, using the applicable tax rate. The relevant debt cost should also reflect current financing conditions rather than automatically using an old bond coupon.
A company reports revenue growth, but its accounts receivable have increased much faster than sales for several periods. What is a reasonable analytical interpretation?
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Correct answer: BReceivables growing faster than revenue can indicate slower collections, changed customer terms, or other factors. The pattern is a warning signal to investigate, not conclusive proof of misconduct or a specific outcome.
A portfolio manager asks an analyst to provide a material, nonpublic forecast received confidentially from an issuer. What is the best course of action?
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Correct answer: CConfidential material information must be handled under applicable legal and firm requirements. The analyst should not circumvent those protections through selective or informal sharing and should seek compliance guidance.
How to use this practice test
The free practice bank contains 50 published questions. Each session presents up to 20 random questions, then shows your results. Use missed or uncertain items to identify whether you need to revisit accounting interpretation, valuation inputs, disclosure analysis, or analyst-conduct decisions.
Preparation tips
- For valuation questions, write down the model’s key inputs—such as normalized earnings, discount rate, debt treatment, and continuing growth—and trace how each changes the result.
- When reviewing revenue-quality scenarios, compare sales growth with receivables and consider what the divergence may imply before drawing a conclusion.
- Practice explaining how convertible-bond terms can affect potential common-share dilution, including the relevance of conversion features.
- For issuer-contact scenarios, distinguish public information from confidential material nonpublic information and assess whether accepting an event invitation could impair research independence.
- For price-target questions, identify the assumptions that drive sensitivity and the disclosures that would help a reader evaluate those assumptions.