100+ Free CCM Equity Securities Practice Questions

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2026 Statistics

Key Facts: CCM Equity Securities Exam

T+2

Settlement Cycle

CSE June 2024

Rs. 500M

Main Board Capital

CSE Listing Rules

LKR 5,000

Exam Fee

SEC Sri Lanka

70%

Passing Score

SEC CMET

Act 19

SEC Sri Lanka Act

No. 19 of 2021

Exam Questions

Multiple Choice

The SEC Sri Lanka Certificate in Equity Securities (CCM) is the mandatory qualification for licensed Registered Investment Advisors (RIAs) in Sri Lanka. The exam consists of 50 multiple-choice questions with a 70% passing score. Key areas tested include Colombo Stock Exchange (CSE) trading boards, S&P SL20 circuit breakers, T+2 settlement, stock valuation models (GGM), and portfolio theory (CAPM). Candidates must also complete a 6-month internship and pass a Viva Voce interview to become fully licensed.

Sample CCM Equity Securities Practice Questions

Try these sample questions to test your CCM Equity Securities exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1Which of the following is a primary characteristic of common stock ownership in a listed company?

A.A guarantee of annual dividend payments

B.A residual claim on corporate assets in the event of liquidation

C.Priority status over bondholders in bankruptcy proceedings

D.The right to veto board of directors appointments individually

Explanation: Common stock represents ownership (equity) in a corporation. Common shareholders have a residual claim on the company's assets, meaning they are entitled to assets only after all creditors, bondholders, and preferred shareholders have been fully satisfied in the event of liquidation.

2A Sri Lankan public company has decided to pay dividends. Who has the first claim to these dividends among the equity holders?

A.Common stockholders

B.Preferred stockholders

C.Debenture holders

D.Warrant holders

Explanation: Preferred stockholders have a preference over common stockholders regarding the payment of dividends. Dividends must be paid to preferred shareholders at their fixed rate before any dividend can be distributed to common shareholders. Note that debenture holders receive interest, not dividends.

3An investor holds 10,000 cumulative preferred shares of Rs. 10.00 issue price with an 8% dividend rate. If the company skips dividends in Year 1 and Year 2, how much must be paid per share to preferred shareholders in Year 3 before common dividends can be paid?

A.Rs. 0.80

B.Rs. 1.60

C.Rs. 2.40

D.Rs. 3.20

Explanation: For cumulative preferred shares, unpaid dividends accumulate as dividends in arrears. The annual dividend per share is 8% of Rs. 10.00 = Rs. 0.80. In Year 3, the cumulative arrears for Year 1 (Rs. 0.80) and Year 2 (Rs. 0.80) plus the current Year 3 dividend (Rs. 0.80) must be paid, totaling Rs. 2.40 per share.

4If a preferred share is convertible into 5 common shares, and the preferred share is currently trading at Rs. 150.00, what is the conversion price of the common stock?

A.Rs. 30.00

B.Rs. 50.00

C.Rs. 15.00

D.Rs. 750.00

Explanation: The conversion price represents the effective cost per common share obtained by converting one preferred share. It is calculated by dividing the preferred share's market price by the conversion ratio: Rs. 150.00 / 5 = Rs. 30.00.

5Which type of preferred shares allows holders to receive additional dividends above the stated fixed rate if the corporation's profits exceed a specified level?

A.Cumulative preferred shares

B.Convertible preferred shares

C.Participating preferred shares

D.Callable preferred shares

Explanation: Participating preferred shares provide their holders with the fixed dividend rate and also allow them to share (participate) in additional dividend distributions with common shareholders if corporate earnings exceed a certain target.

6What is the primary benefit to a corporation issuing callable preferred shares?

A.It allows the issuer to force conversion into common shares at any time.

B.It provides the issuer with the right to retire the shares if interest/dividend rates fall.

C.It guarantees that shareholders cannot sell their stock back to the market.

D.It lowers the initial dividend rate compared to non-callable preferred shares.

Explanation: Callable preferred shares give the issuing company the right to buy back (call) the shares at a pre-specified price after a certain date. This is beneficial if market interest or dividend rates drop, as the company can retire the high-dividend shares and refinance at lower costs.

7Pre-emptive rights are issued to existing shareholders of a company to protect them against:

A.Market volatility and price declines

B.Dilution of ownership and voting power

C.The non-payment of preferred dividends

D.Corporate takeover bids by foreign entities

Explanation: Pre-emptive rights give existing common shareholders the right of first refusal to purchase new shares issued by the corporation, in proportion to their current holdings. This prevents dilution of their voting power and ownership interest.

8A listed company on the CSE announces a Rights Issue of 1-for-4 at an subscription price of Rs. 80.00. If the market price before the rights issue is Rs. 100.00 (cum-rights), what is the Theoretical Ex-Rights Price (TERP)?

A.Rs. 95.00

B.Rs. 96.00

C.Rs. 90.00

D.Rs. 84.00

Explanation: TERP is calculated by taking the total value of shares held before and after exercising the rights, divided by the total number of shares: TERP = [(4 shares * Rs. 100) + (1 share * Rs. 80)] / (4 + 1) = [400 + 80] / 5 = 480 / 5 = Rs. 96.00.

9When a company issues bonus shares (capitalization of reserves) to its shareholders, which of the following is true?

A.The stated capital increases, while total equity remains unchanged.

B.The cash balance of the company increases due to share premium payments.

C.Each shareholder's percentage ownership in the company increases.

D.The net asset value per share remains exactly the same.

Explanation: A bonus issue involves transferring funds from retained earnings or reserves to stated capital. Therefore, stated capital increases, but total equity remains unchanged because no new cash enters the firm. Shareholder percentage ownership is unchanged, and stock price adjusts downward, reducing net asset value per share.

10A stock split of 2-for-1 will result in which of the following changes to the company's financial structure?

A.Double the total stated capital of the company

B.Halve the book value per share and double the number of outstanding shares

C.A direct outflow of cash to shareholders equivalent to the dividend value

D.An increase in the total market value of the company's equity

Explanation: A 2-for-1 stock split doubles the number of shares outstanding and halves the value per share (book value and market price). Stated capital and total equity remain unchanged. It is a cosmetic change to improve stock liquidity.

About the CCM Equity Securities Exam

Practice test prep for the SEC Sri Lanka Certificate in Equity Securities (CCM) exam. Focuses on CSE operations, stock valuation, trading regulations, and portfolio management rules. Essential for Registered Investment Advisor (RIA) licensing.

Questions

50 scored questions

Time Limit

1 hour 30 minutes

Passing Score

70%

Exam Fee

LKR 5,000 (Securities and Exchange Commission of Sri Lanka)

CCM Equity Securities Exam Content Outline

20%

Equity Markets and Instruments

Characteristics of common/preferred equity, voting rights, IPOs, Rights issues, and participant functions.

25%

Colombo Stock Exchange (CSE) Operations

CSE trading hours, listing boards (Main/Diri Savi/Empower), S&P SL20 and ASPI indices, and CDS procedures.

20%

Stock Valuation & Analysis

Time value of money, dividend discount models (GGM), P/E and P/B ratios, ROE, and fundamental analysis.

20%

Trading Rules & Regulations

T+2 settlement cycles, tick sizes (Rs. 0.10/0.25 bands), order types, circuit breakers, and SEC Act No. 19 of 2021 market abuse rules.

15%

Portfolio Management & CAPM

Portfolio return and risk, CAPM (Beta, Rf, Rm), Security Market Line, and performance metrics (Sharpe, Treynor).

How to Pass the CCM Equity Securities Exam

What You Need to Know

Passing score: 70%
Exam length: 50 questions
Time limit: 1 hour 30 minutes
Exam fee: LKR 5,000

Keys to Passing

Complete 500+ practice questions
Score 80%+ consistently before scheduling
Focus on highest-weighted sections
Use our AI tutor for tough concepts

CCM Equity Securities Study Tips from Top Performers

1Focus on the S&P SL20 index circuit breaker tiers (5%, 7.5%, and 10% declines) and corresponding market action.

2Practice quantitative calculations for the Gordon Growth Model (GGM) and Capital Asset Pricing Model (CAPM) as they appear frequently.

3Memorize the tick size thresholds: Rs. 0.10 for shares <= Rs. 100, and Rs. 0.25 for shares > Rs. 100.

4Understand the listing differences between the Main Board (Rs. 500Mn stated capital, 25% float) and Diri Savi Board (Rs. 100Mn stated capital, 10% float).

5Familiarize yourself with the market abuse and insider trading definitions under the Securities and Exchange Commission of Sri Lanka Act, No. 19 of 2021.

Frequently Asked Questions

What is the Colombo Stock Exchange settlement cycle for equities?

The Colombo Stock Exchange (CSE) transitioned to a T+2 settlement cycle for equity transactions on June 10, 2024. This means clearing and settlement of cash and shares occur two business days after the trade date (T+2).

What are the tick sizes for LKR-denominated shares on the CSE?

The tick size (minimum price movement) depends on the share price: Rs. 0.10 for shares priced at Rs. 100 or less, and Rs. 0.25 for shares priced above Rs. 100. For USD-denominated shares on the Multi-Currency Board, the tick size is US$0.10.

How do index-based circuit breakers work on the CSE?

The CSE circuit breakers are triggered by declines in the S&P SL 20 index (not the ASPI). A 5% drop triggers a 30-minute halt. A further decline of 2.5% (aggregate 7.5%) triggers a second 30-minute halt. A final decline of 2.5% (aggregate 10%) closes the market for the rest of the day.

What are the requirements to list on the CSE Main Board vs Diri Savi Board?

The Main Board is for larger companies and requires a minimum stated capital of Rs. 500 million and a minimum public holding of 25%. The Diri Savi Board is for smaller/high-growth firms and requires a minimum stated capital of Rs. 100 million and a minimum public holding of 10%.

How do I become a Registered Investment Advisor (RIA) in Sri Lanka?

To become a licensed RIA, you must pass the SEC Sri Lanka Certificate in Capital Markets (CCM) examinations (typically Series 1, 2, 6, and 7), complete a mandatory 6-month industry training period at a licensed stockbroker or investment firm, and pass a Viva Voce (oral examination) conducted by the SEC/CSE panel.