CDP (Financial Data) 2 — Questions and Answers
Question 1: Which financial data standard defines a common language for electronic communication of business and financial data?
- XBRL (Correct answer)
- CSV
- EDI
- JSON-LD
Correct answer: XBRL
XBRL (eXtensible Business Reporting Language) is the global standard for exchanging business and financial information.
Question 2: A data analyst notices that a company's balance sheet does not balance. Which accounting identity should hold true?
- Assets = Liabilities + Equity (Correct answer)
- Revenue = Expenses + Profit
- Assets = Revenue - Liabilities
- Equity = Assets + Liabilities
Correct answer: Assets = Liabilities + Equity
The fundamental accounting equation states that Assets must equal Liabilities plus Shareholders' Equity.
Question 3: When normalizing financial data across multiple companies, which challenge is most commonly encountered?
- Differences in fiscal year end dates and accounting policies (Correct answer)
- Inconsistent use of decimal separators
- Varying database engine versions
- Incompatible programming languages
Correct answer: Differences in fiscal year end dates and accounting policies
Companies adopt different fiscal year calendars and accounting policy choices (e.g., depreciation methods), requiring normalization before comparison.
Question 4: Which metric best measures how efficiently a company uses assets to generate profit?
- Return on Assets (ROA) (Correct answer)
- Current Ratio
- Debt-to-Equity Ratio
- Gross Margin
Correct answer: Return on Assets (ROA)
ROA = Net Income / Total Assets, directly measuring how much profit is generated per dollar of assets.
Question 5: In financial data management, what is a 'mark-to-market' valuation?
- Valuing an asset at its current market price rather than historical cost (Correct answer)
- Recording revenue when payment is received
- Adjusting inventory to lower of cost or net realizable value
- Spreading asset cost over its useful life
Correct answer: Valuing an asset at its current market price rather than historical cost
Mark-to-market (fair value accounting) records assets and liabilities at their current market value each reporting period.
Question 6: What does the P/E ratio measure in equity financial data?
- Price per share relative to earnings per share (Correct answer)
- Profit margin relative to total equity
- Price volatility relative to earnings growth
- Portfolio exposure relative to equity capital
Correct answer: Price per share relative to earnings per share
The Price-to-Earnings ratio divides a stock's current share price by its earnings per share to indicate valuation.
Question 7: A CDP candidate is building a data pipeline for SEC 10-K filings. Which identifier uniquely distinguishes each SEC registrant?
- CIK (Central Index Key) (Correct answer)
- ISIN
- CUSIP
- LEI
Correct answer: CIK (Central Index Key)
The SEC assigns every registrant a unique Central Index Key (CIK) used to identify filers in EDGAR.
CDP (Financial Data) 2
Which financial data standard defines a common language for electronic communication of business and financial data?