SASB FSA LEVEL 2 EXAM STUDY GUIDE
2026/2027 COMPLETE QUESTIONS WITH
CORRECT DETAILED ANSWERS ||
100% GUARANTEED PASS
<LATEST VERSION>
1. What are the 3 main considerations that shape each INDUSTRY's
sustainability profile - ANSWER ✔ 1. Societal License to operate;
Use of common Capitals; and
costs to society or environmental Externalities
Lets Climb Everest
2. Societal licenses to operate - ANSWER ✔ the ongoing acceptance of a
business endeavor from the local, regional, or national community
(in return for an extensive license to operate or for getting certain
concessions that other industries don't, firms in specific industries are
expected to fulfill certain societal goals or else to have restrictions placed on
some aspects for their operations)
3. Industries with extensive license to operate include (4): - ANSWER ✔ 1.
Quasi-public services (ex. utilities, mortgage and student loan providers,
telephone and cable companies, transportation authorities);
2. Have access to exclusive use of a public good (ex. utilities)
, 3. Benefit from intellectual property protection
4. Have a fiduciary duty that extends beyond shareholders (ex. finance and
professional services)
4. Use of common capitals - ANSWER ✔ include elements as varied as water
and employees. These are nonfinancial capitals available to an industry as a
source of value creation but not owned or controlled by the companies in
that industry.
5. Examples of common capitals include (3 categories): - ANSWER ✔ -
Natural capital: such as forests, mineral deposits and water
- Public infrastructure: such as roads and wastewater systems
- human capital
6. When analyzing dispersion, what 3 questions should a user ask themselves?
- ANSWER ✔ 1. Does the metric yield discrete data?
(discrete= finite, whole numbers)
2. Does the metric yield continuous data?
(not discrete = percentages, rates, fractions, acres, barrels, gallons...)
3. What is the possible range of performance on the metric?
(Is the data capped? Does it go on forever? Is there a range or possible
numbers?)
,7. normal distribution - ANSWER ✔ a bell-shaped curve, describing the spread
of a characteristic throughout a population
8. central tendency - ANSWER ✔ mean, median, mode
9. Quantiles - ANSWER ✔ Divisions of a probability distribution or frequency
distribution into equal, ordered subgroups, for example, quartiles or
percentiles.
10.Current Ratio - ANSWER ✔ Current Assets / Current Liabilities
11.Quick Ratio - ANSWER ✔ (cash + marketable securities + receivables) /
current liabilities
12.Total Asset Turnover - ANSWER ✔ Revenue / Avg Total Assets
13.Fixed Asset Turnover - ANSWER ✔ Revenue / Avg Fixed Assets
14.Gross Profit Margin - ANSWER ✔ Gross Profit / Revenue
15.factors that affect low quality earnings - ANSWER ✔ 1) biased accounting
choices
2) not sustainable
16.which type of earnings are more persistent - ANSWER ✔ cash based is
more persistent than accruals based earnings
, - more sustainable in the future
companies with a higher proportion of cash-based earnings will have a
higher persistence of earnings
companies with large proportions of accruals-based earnings historically
have experienced more rapid reversions to the mean.
17.variable interest entity (VIE) - ANSWER ✔ Is a legal structure used for
business purposes, usually a corporation, trust, or partnership, that either
(1) does not have equity investors that have voting rights and
share in all of the entity's profits and losses or
(2) has equity investors that do not provide sufficient financial
resources to support the entity's activities.
18.An entity that has one of the following characteristics:
1. insufficient equity investment at risk
2. stockholders lack decision-making rights
3. stockholders do not absorb the losses or receive the normal benefits of a
normal stockholder.
19.Benefit of VIE - ANSWER ✔ used if the company is exposed to variable
interest due to gains and losses on conversion option on convertible debt
- if classified as VIE --> interest income is NOT recognized on
consolidated income statement
20.Factors that indicate excessive expenditure capitalization - ANSWER ✔
increase in proportion of assets other than PPE or current assets over time
2026/2027 COMPLETE QUESTIONS WITH
CORRECT DETAILED ANSWERS ||
100% GUARANTEED PASS
<LATEST VERSION>
1. What are the 3 main considerations that shape each INDUSTRY's
sustainability profile - ANSWER ✔ 1. Societal License to operate;
Use of common Capitals; and
costs to society or environmental Externalities
Lets Climb Everest
2. Societal licenses to operate - ANSWER ✔ the ongoing acceptance of a
business endeavor from the local, regional, or national community
(in return for an extensive license to operate or for getting certain
concessions that other industries don't, firms in specific industries are
expected to fulfill certain societal goals or else to have restrictions placed on
some aspects for their operations)
3. Industries with extensive license to operate include (4): - ANSWER ✔ 1.
Quasi-public services (ex. utilities, mortgage and student loan providers,
telephone and cable companies, transportation authorities);
2. Have access to exclusive use of a public good (ex. utilities)
, 3. Benefit from intellectual property protection
4. Have a fiduciary duty that extends beyond shareholders (ex. finance and
professional services)
4. Use of common capitals - ANSWER ✔ include elements as varied as water
and employees. These are nonfinancial capitals available to an industry as a
source of value creation but not owned or controlled by the companies in
that industry.
5. Examples of common capitals include (3 categories): - ANSWER ✔ -
Natural capital: such as forests, mineral deposits and water
- Public infrastructure: such as roads and wastewater systems
- human capital
6. When analyzing dispersion, what 3 questions should a user ask themselves?
- ANSWER ✔ 1. Does the metric yield discrete data?
(discrete= finite, whole numbers)
2. Does the metric yield continuous data?
(not discrete = percentages, rates, fractions, acres, barrels, gallons...)
3. What is the possible range of performance on the metric?
(Is the data capped? Does it go on forever? Is there a range or possible
numbers?)
,7. normal distribution - ANSWER ✔ a bell-shaped curve, describing the spread
of a characteristic throughout a population
8. central tendency - ANSWER ✔ mean, median, mode
9. Quantiles - ANSWER ✔ Divisions of a probability distribution or frequency
distribution into equal, ordered subgroups, for example, quartiles or
percentiles.
10.Current Ratio - ANSWER ✔ Current Assets / Current Liabilities
11.Quick Ratio - ANSWER ✔ (cash + marketable securities + receivables) /
current liabilities
12.Total Asset Turnover - ANSWER ✔ Revenue / Avg Total Assets
13.Fixed Asset Turnover - ANSWER ✔ Revenue / Avg Fixed Assets
14.Gross Profit Margin - ANSWER ✔ Gross Profit / Revenue
15.factors that affect low quality earnings - ANSWER ✔ 1) biased accounting
choices
2) not sustainable
16.which type of earnings are more persistent - ANSWER ✔ cash based is
more persistent than accruals based earnings
, - more sustainable in the future
companies with a higher proportion of cash-based earnings will have a
higher persistence of earnings
companies with large proportions of accruals-based earnings historically
have experienced more rapid reversions to the mean.
17.variable interest entity (VIE) - ANSWER ✔ Is a legal structure used for
business purposes, usually a corporation, trust, or partnership, that either
(1) does not have equity investors that have voting rights and
share in all of the entity's profits and losses or
(2) has equity investors that do not provide sufficient financial
resources to support the entity's activities.
18.An entity that has one of the following characteristics:
1. insufficient equity investment at risk
2. stockholders lack decision-making rights
3. stockholders do not absorb the losses or receive the normal benefits of a
normal stockholder.
19.Benefit of VIE - ANSWER ✔ used if the company is exposed to variable
interest due to gains and losses on conversion option on convertible debt
- if classified as VIE --> interest income is NOT recognized on
consolidated income statement
20.Factors that indicate excessive expenditure capitalization - ANSWER ✔
increase in proportion of assets other than PPE or current assets over time
