Free CFA Level II Financial Statement Analysis Practice Questions (2026)

Free CFA Level II Financial Statement Analysis Practice Questions

Financial statement analysis on the CFA Level II exam covers intercorporate investments, employee compensation accounting, multinational operations, and financial reporting quality assessment. Weighted 10-15% (CFA Institute).

263 questions 49 easy 147 medium 67 hard 2026 syllabus

Sample Questions

Question 1 Easy

What is SummitBank's efficiency ratio?

Solution

C is correct.

The bank efficiency ratio =

\frac{\text{Non-interest expense}}{\text{Net interest income + Non-interest income}}

= \frac{950}{1{,}400 + 350} = \frac{950}{1{,}750} = 54.3\%

The efficiency ratio measures operating costs as a percentage of total revenue.

Question 2 Medium

What is the ending PBO for Year 4?

Solution

C is correct.

The PBO reconciliation:

Beginning PBO: 120M
Add: Service cost: 8M
Add: Interest cost: 6M
Add: Actuarial loss: 4M (increases the PBO because a lower discount rate raises the present value of obligations)
Less: Benefits paid:

-7

M

Ending PBO =

120 + 8 + 6 + 4 - 7 = 131

M

The PBO increases for service cost, interest, and actuarial losses, and decreases for benefits paid.

Question 3 Hard

What is the ending loss reserve balance?

Solution

B is correct.

The loss reserve changes as follows:

Beginning reserve: 15,000M
Add: New claims incurred: 8,200M
Less: Claims paid:

-7{,}800

M
Less: Prior-year reserve reduction (favorable development):

-400

M

Ending reserve =

15{,}000 + 8{,}200 - 7{,}800 - 400 = 15{,}000

M

The ending reserve equals the beginning reserve because new claims roughly offset payments, and the favorable prior-year development offsets the net addition.

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