I85PREP
⌘ K
Series 86 study materials
Series 86 study resources

Series 86 practice questions

One question at a time. Build your Series 86 understanding.

First 50 of 200 questions. Each one lists the choices, the correct answer, and an explanation. The checker at the top of this page saves progress in this browser when it is available.

Continue in the practice tool above to load more questions, 50 at a time.

Question 1Information and Data Collection

An analyst needs a company's most recent annual report exactly as it was filed with the SEC. Which source provides that document free of charge?

  1. A credit rating agency's press release
  2. The Federal Reserve's FRED database
  3. The SEC's EDGAR system Correct answer.
  4. The company's investor relations brochure

Explanation

EDGAR is the SEC's public archive of registration statements and periodic reports, and it provides filed documents at no cost. Other databases and marketing materials either carry different content or reproduce filings selectively.

Question 2Information and Data Collection

Which SEC filing would an analyst review to obtain detailed disclosure of a public company's chief executive officer's compensation?

  1. A definitive proxy statement on Schedule 14A Correct answer.
  2. A quarterly report on Form 10-Q
  3. A beneficial ownership report on Schedule 13G
  4. A current report on Form 8-K

Explanation

Executive compensation, including the summary compensation table and related party disclosures, appears in the annual definitive proxy statement solicited for the shareholders' meeting. Periodic reports and ownership schedules do not carry the full compensation tables.

Question 3Information and Data Collection

How does a Form 10-Q differ from a Form 10-K?

  1. It is filed only after a material corporate event occurs
  2. It is unaudited and covers a fiscal quarter Correct answer.
  3. It is required only of foreign private issuers
  4. It reports changes in beneficial ownership by insiders

Explanation

A Form 10-Q presents unaudited quarterly financial statements and MD&A and is filed for each of the first three fiscal quarters. The annual Form 10-K contains audited full-year financial statements.

Question 4Information and Data Collection

In equity research, primary research is best described as information gathered from:

  1. Digests that summarize previously published SEC filings
  2. Databases that aggregate consensus analyst estimates
  3. Interviews and site visits conducted by the analyst Correct answer.
  4. Statistics derived from historical trading volume patterns

Explanation

Primary research involves collecting new information directly from original sources, such as company interviews, site visits, and surveys. Secondary research relies on information already published or compiled by others.

Question 5Information and Data Collection

Which of the following sets consists of nationally recognized statistical rating organizations (NRSROs)?

  1. Moody's, S&P Global Ratings, and Fitch Ratings Correct answer.
  2. FINRA and the Municipal Securities Rulemaking Board
  3. Bloomberg, FactSet, and Refinitiv
  4. The Federal Reserve, the FDIC, and the OCC

Explanation

NRSRO status is granted by the SEC to credit rating agencies whose ratings are used for regulatory purposes; Moody's, S&P Global Ratings, and Fitch are the largest such firms. The other listed entities are self-regulatory organizations, bank regulators, or data vendors.

Question 6Information and Data Collection

An analyst needs data on unit shipments, capacity utilization, and pricing for a manufacturing industry. Which source is most appropriate?

  1. Trade association publications and trade journals Correct answer.
  2. The company's own audited financial statements
  3. A Schedule 13D beneficial ownership filing
  4. The Federal Reserve's weekly H.15 interest rate release

Explanation

Industry-level operating statistics such as shipments, capacity, and pricing are typically compiled by trade associations, trade press, and industry research providers. Company filings cover only that issuer, and the other sources concern unrelated matters.

Question 7Information and Data Collection

The Global Industry Classification Standard (GICS) is used primarily to:

  1. Set margin requirements for securities loans
  2. Sort companies into sectors and industry groups Correct answer.
  3. Calculate diluted earnings per share
  4. Assign credit ratings to issuers

Explanation

GICS is a hierarchical taxonomy that groups companies by sector, industry group, industry, and sub-industry so that peers can be identified consistently. It is not a credit, accounting, or regulatory margin framework.

Question 8Information and Data Collection

In a sell-side merger process, a virtual data room is used primarily to:

  1. Record shareholder votes on the merger agreement
  2. Give bidders controlled access to diligence materials Correct answer.
  3. Host the auction of the target's shares on an exchange
  4. Publish the target's audited statements to the public

Explanation

A data room is a permission-controlled repository where prospective buyers review confidential documents during due diligence. Access is tracked and tiered, and the information remains nonpublic.

Question 9Information and Data Collection

A public company announces that its chief financial officer has resigned. Within what period must the company generally file a Form 8-K reporting the event?

  1. Four business days Correct answer.
  2. One business day
  3. Fifteen calendar days
  4. Forty-five calendar days

Explanation

Most Form 8-K items, including a principal officer's departure, must be reported within four business days after the triggering event. The longer deadlines apply to narrow categories such as certain financial statements for acquired businesses.

Question 10Information and Data Collection

A CFO discloses unreleased quarterly earnings guidance to a single research analyst who covers the company. Under Regulation FD, the company must:

  1. Take no action because research analysts are excluded persons
  2. Make public disclosure of the information simultaneously or promptly Correct answer.
  3. Obtain the analyst's written consent to keep the information confidential
  4. File the information on Form 8-K within 45 days

Explanation

Regulation FD prohibits selective disclosure of material nonpublic information to securities professionals and requires public disclosure at the same time, or promptly after, an unintentional disclosure. Analysts are expressly covered persons.

Question 11Information and Data Collection

An associate learns from a client, with no confidentiality agreement in place, that a tender offer will be announced the next morning. The associate buys the target's stock. This conduct is:

  1. Permissible because no confidentiality agreement was signed
  2. A violation of the federal insider trading laws Correct answer.
  3. Acceptable if the position is disclosed to compliance
  4. Acceptable because the associate performed independent research

Explanation

Trading on material nonpublic information obtained through a relationship of trust and confidence, or misappropriated from its source, violates the antifraud provisions of the securities laws. The absence of a signed agreement does not make the information public.

Question 12Information and Data Collection

For a comparables analysis, consensus earnings estimates for a peer group are most typically obtained from:

  1. The issuer's transfer agent records
  2. The Federal Reserve's Survey of Professional Forecasters
  3. Broker estimate services and financial data platforms Correct answer.
  4. The issuer's internal management budget

Explanation

Consensus figures are averages or medians of published analyst estimates, distributed by institutional brokerage estimate services and market data platforms. Transfer agents, internal budgets, and macro surveys do not provide company-level consensus estimates.

Question 13Information and Data Collection

Which U.S. government agency publishes the monthly Employment Situation report containing nonfarm payrolls and the unemployment rate?

  1. The Federal Reserve Board
  2. The Bureau of Labor Statistics Correct answer.
  3. The Bureau of Economic Analysis
  4. The Census Bureau

Explanation

The Bureau of Labor Statistics compiles the monthly Employment Situation report from household and establishment surveys. The other agencies publish GDP, monetary policy, and population or retail trade data respectively.

Question 14Information and Data Collection

When calculating diluted earnings per share for a company with convertible bonds, the numerator is adjusted by adding back:

  1. The principal amount of the bonds
  2. The conversion premium on the bonds
  3. The after-tax interest expense on the bonds Correct answer.
  4. The full amount of interest expense on the bonds

Explanation

Assuming conversion eliminates the interest expense, but earnings are measured after tax, so the after-tax interest is added back to net income. Adding back the full pretax interest would overstate the numerator.

Question 15Information and Data Collection

A company has a market capitalization of $500 million, total debt of $200 million, and cash of $50 million. Its enterprise value is:

  1. $750 million
  2. $650 million Correct answer.
  3. $250 million
  4. $450 million

Explanation

Enterprise value equals market capitalization plus total debt minus cash and equivalents: $500 + $200 - $50 = $650 million. Cash is subtracted because it reduces the net price an acquirer effectively pays.

Question 16Information and Data Collection

An analyst uses a third-party expert network to speak with a former employee of a covered company. The most important compliance step is to:

  1. Obtain the issuer's prior approval of the questions asked
  2. Pay the expert in the covered company's common stock
  3. Confirm the expert is not bound by a confidentiality duty Correct answer.
  4. Record the call and post it to the firm's intranet

Explanation

The analyst must confirm the expert owes no ongoing confidentiality obligation to the former employer, so the conversation does not transmit misappropriated material nonpublic information. Payment in stock of the covered company would create additional conflicts.

Question 17Information and Data Collection

In a merger due diligence process, a confidentiality agreement between buyer and target typically:

  1. Requires the target to accept the highest offer received
  2. Restricts use and disclosure of nonpublic information Correct answer.
  3. Eliminates the buyer's obligation to conduct diligence
  4. Grants the buyer the right to vote the target's shares

Explanation

A confidentiality, or standstill-linked, agreement limits how the buyer may use and share information received in the process and often imposes standstill provisions. It does not transfer voting rights or dictate the outcome of the sale.

Question 18Information and Data Collection

Which form does a foreign private issuer typically use for its annual report filed with the SEC?

  1. Form 10-Q
  2. Form 20-F Correct answer.
  3. Form 10-K
  4. Form 8-K

Explanation

Foreign private issuers file an annual report on Form 20-F and furnish interim information on Form 6-K. Domestic issuers use Forms 10-K and 10-Q.

Question 19Information and Data Collection

A company restates prior-period financial statements to correct an accounting error. When building a multiyear trend analysis, an analyst should:

  1. Rely only on the company's historical share prices
  2. Use the originally reported figures for consistency
  3. Average the original and restated figures
  4. Use the restated figures for consistent comparisons Correct answer.

Explanation

Restated statements replace the erroneous figures and present all periods on a corrected, comparable basis. Using original numbers would mix inconsistent accounting and distort growth rates.

Question 20Information and Data Collection

Item 7 of Form 10-K, Management's Discussion and Analysis, is required to address:

  1. The compensation paid to the underwriters
  2. Known trends, uncertainties, and liquidity matters Correct answer.
  3. The biographies of the board of directors
  4. Only the current year's audited financial statements

Explanation

MD&A requires management to explain results of operations, liquidity, capital resources, and known trends, demands, commitments, and uncertainties. Biographical and underwriting compensation disclosures appear elsewhere in the filing.

Question 21Information and Data Collection

A company presents adjusted EBITDA in an earnings press release. Under Regulation G, the company must:

  1. Omit the comparable GAAP measure to avoid confusion
  2. Obtain SEC pre-approval of the non-GAAP measure
  3. Reconcile it to the most comparable GAAP measure Correct answer.
  4. Present the measure only in filings on Form 10-K

Explanation

Regulation G requires that a non-GAAP financial measure disclosed publicly be accompanied by the most directly comparable GAAP measure and a quantitative reconciliation. There is no SEC pre-clearance process for non-GAAP measures.

Question 22Information and Data Collection

A company voluntarily changes from one acceptable inventory costing method to another. Under U.S. GAAP, the change is generally applied:

  1. Only after SEC approval of the change is obtained
  2. Prospectively, with no adjustment to prior periods
  3. Retrospectively, with prior periods recast Correct answer.
  4. By direct charge to retained earnings only

Explanation

A change in accounting principle is applied retrospectively, recasting prior-period financial statements as if the new method had always been used. Changes in estimate, by contrast, are applied prospectively.

Question 23Information and Data Collection

Unaudited pro forma financial information in a merger proxy statement is presented primarily to show:

  1. The advisory fees paid to the financial advisors
  2. The appraised liquidation value of the target
  3. The target's historical results before the merger
  4. The combined results as if the deal had occurred earlier Correct answer.

Explanation

Pro forma information gives shareholders a view of the combined entity's results and financial position assuming the transaction had closed at an earlier date, including transaction accounting adjustments. Historical and fee disclosures appear elsewhere in the document.

Question 24Information and Data Collection

In a quality-of-earnings analysis, adding back a charge that has been recorded in each of the last three years is generally:

  1. Appropriate, since all non-cash charges are excluded
  2. Required by Regulation G for all non-GAAP measures
  3. Appropriate only if the charge exceeds 5% of revenue
  4. Inappropriate, because the charge appears recurring Correct answer.

Explanation

An adjustment presented as non-recurring loses credibility when the item recurs, since recurring costs are part of normal operations. Regulation G addresses reconciliation and presentation, not whether an add-back is economically justified.

Question 25Information and Data Collection

A company has 100 million basic shares outstanding and 10 million options outstanding with an exercise price of $10 when the average market price is $20. Under the treasury stock method, diluted shares outstanding are:

  1. 120 million
  2. 110 million
  3. 105 million Correct answer.
  4. 100 million

Explanation

Assumed exercise proceeds of $100 million repurchase 5 million shares at $20, so the incremental share count is 10 million minus 5 million, or 5 million. Adding that to 100 million basic shares gives 105 million.

Question 26Information and Data Collection

Which SEC system provides free public access to corporate filings such as annual reports, quarterly reports, and registration statements?

  1. CRSP
  2. EDGAR Correct answer.
  3. TRACE
  4. IARD

Explanation

EDGAR (Electronic Data Gathering, Analysis, and Retrieval) is the SEC's public repository for electronically filed registration statements, periodic reports, and ownership filings. Analysts use it as the primary source for original filings rather than third-party summaries.

Question 27Information and Data Collection

A large accelerated filer with a December 31 fiscal year end must file its Form 10-Q for the quarter ended March 31 no later than:

  1. 40 days after quarter end Correct answer.
  2. 45 days after quarter end
  3. 30 days after quarter end
  4. 60 days after quarter end

Explanation

Large accelerated and accelerated filers have 40 days after quarter end to file Form 10-Q, while non-accelerated filers have 45 days. The 60-day deadline applies to the Form 10-K of a large accelerated filer, not to quarterly reports.

Question 28Information and Data Collection

Under Section 16, a corporate officer must report a change in beneficial ownership of the company's stock on Form 4 within:

  1. the end of the calendar month
  2. 10 calendar days
  3. two business days Correct answer.
  4. five business days

Explanation

Form 4 is due before the end of the second business day following the transaction date. Form 3, by contrast, is due within 10 days of becoming an officer, director, or 10% holder.

Question 29Information and Data Collection

Which U.S. agency publishes the quarterly estimates of gross domestic product and corporate profits used to frame macroeconomic forecasts?

  1. Census Bureau
  2. BLS
  3. BEA Correct answer.
  4. Federal Reserve

Explanation

The Bureau of Economic Analysis (BEA) produces the national income and product accounts, including GDP, corporate profits, and personal income. These releases are a standard input for top-down revenue and margin assumptions.

Question 30Information and Data Collection

An analyst surveys independent distributors to estimate a retailer's sell-through of a new product. This activity is best described as:

  1. quantitative screening
  2. consensus estimation
  3. secondary research
  4. primary research Correct answer.

Explanation

Primary research generates new information directly from original sources such as surveys, channel checks, and interviews. Secondary research relies on information already published by others.

Question 31Information and Data Collection

An investment adviser with $150 million in Section 13(f) securities must report its holdings on Form 13F:

  1. annually, within 90 days of fiscal year end
  2. quarterly, within 45 days of each calendar quarter end Correct answer.
  3. monthly, within 10 days of month end
  4. semiannually, within 60 days of each half-year end

Explanation

Managers exercising investment discretion over at least $100 million in Section 13(f) securities file Form 13F within 45 days after each calendar quarter end. The filings are a standard source for tracking institutional ownership changes.

Question 32Information and Data Collection

An investor acquires 7% of a public company's voting shares and intends to press management to pursue a sale of the company. The investor must file:

  1. Schedule 13D within five business days Correct answer.
  2. Schedule 13G within 45 days of quarter end
  3. Form 13F for the quarter
  4. Form 8-K within four business days

Explanation

Crossing 5% with a control or influence intent requires an initial Schedule 13D within five business days, with prompt amendments for material changes. Schedule 13G is reserved for qualifying passive and institutional holders.

Question 33Information and Data Collection

The mosaic theory of securities analysis permits an analyst to:

  1. disclose a client's confidential order flow to the trading desk
  2. accept nonpublic information from an issuer without any duty to the source
  3. combine immaterial nonpublic information with public information Correct answer.
  4. trade on material nonpublic information once another analyst confirms it

Explanation

Under the mosaic theory, an analyst may piece together public information and nonmaterial nonpublic information to reach a conclusion. The theory does not authorize trading on material nonpublic information or on information obtained in breach of a duty.

Question 34Information and Data Collection

Detailed disclosure of a U.S. public company's executive compensation, including the Compensation Discussion and Analysis, appears in which filing?

  1. The Form 10-K annual report
  2. The Schedule 14A proxy statement Correct answer.
  3. The Form S-1 registration statement
  4. The Form 8-K current report

Explanation

Item 402 of Regulation S-K requires compensation disclosure, including the Compensation Discussion and Analysis, in the proxy statement filed on Schedule 14A. The 10-K covers business, risk factors, and financial statements but not the CD&A.

Question 35Information and Data Collection

A consumer credit card panel is used to estimate a retailer's quarterly same-store sales. The most significant limitation of this dataset is that it:

  1. captures unit volume rather than dollar revenue
  2. reflects only the panel's cardholders, not all shoppers Correct answer.
  3. is published only after the company files its quarterly report
  4. covers only privately held companies

Explanation

Alternative datasets such as card panels observe only the transactions of participating cardholders, so coverage, weighting, and representativeness must be assessed before extrapolating to the whole company. Panel composition can differ systematically in income, geography, or store format.

Question 36Information and Data Collection

A private company planning an initial public offering must register the offering with the SEC by filing:

  1. Form S-1 Correct answer.
  2. Form 8-A
  3. Form D
  4. Form 10-K

Explanation

An IPO is registered under the Securities Act on Form S-1, which contains the business description, risk factors, use of proceeds, and financial statements. Form D, by contrast, is a notice of an exempt private placement.

Question 37Information and Data Collection

A preliminary prospectus circulated to prospective investors before the effective date of an IPO registration is commonly called a:

  1. tombstone
  2. free-writing prospectus
  3. letter of intent
  4. red herring Correct answer.

Explanation

The preliminary prospectus carries a red legend warning that registration has not yet become effective, hence the nickname red herring. It allows marketing and price discovery before the final prospectus is delivered.

Question 38Information and Data Collection

An issuer's chief executive unintentionally discloses material nonpublic information to a research analyst. Under Regulation FD, the issuer must make public disclosure:

  1. promptly, no later than 24 hours or the next trading open Correct answer.
  2. at the time of its next quarterly earnings release
  3. only if the analyst later publishes a report
  4. within four business days on Form 8-K

Explanation

When selective disclosure is unintentional, Regulation FD requires the issuer to disclose the information publicly promptly, generally within 24 hours or by the start of the next trading day. Intentional disclosures must be public simultaneously.

Question 39Information and Data Collection

Two third-party providers report materially different market share estimates for the same company. The most appropriate analytical step is to:

  1. discard both estimates and omit market share from the model
  2. use the lower estimate to be conservative
  3. compare methodologies and reconcile to a primary source Correct answer.
  4. average the two figures to eliminate the disagreement

Explanation

Differing estimates usually reflect different universe definitions, unit versus revenue measurement, or channel coverage. Reconciling methodologies and checking against a primary source such as company or regulator data produces a defensible figure.

Question 40Information and Data Collection

Earnings information furnished to the SEC under Item 2.02 of Form 8-K is best characterized as:

  1. furnished, so not deemed filed for Section 18 purposes Correct answer.
  2. filed, and therefore subject to Section 18 liability for misleading statements
  3. furnished, and therefore exempt from Regulation FD
  4. filed, and therefore incorporated by reference into later reports

Explanation

Item 2.02 information is furnished rather than filed, so it is not deemed filed for Section 18 liability and is not automatically incorporated by reference into other filings. Regulation FD and the anti-fraud rules still apply to the statements.

Question 41Information and Data Collection

An analyst backtests a strategy using a vendor database that contains only companies currently listed in the index. The historical return estimate is most likely:

  1. understated because failed firms are excluded
  2. understated because the database lags reported earnings
  3. unaffected, since index membership is set by market capitalization
  4. overstated because delisted and acquired companies are excluded Correct answer.

Explanation

Using only current constituents introduces survivorship bias: companies that were delisted, went bankrupt, or were acquired for poor performance drop out of the sample. The remaining history looks better than what an investor could actually have earned, so returns are overstated.

Question 42Information and Data Collection

A company reports revenue growth well below a paid research firm's estimate of market growth for the same period. The most likely explanation is that the research firm:

  1. is required by Regulation FD to publish figures supplied by the company
  2. has used the company's prior-year filings as its only input
  3. defines the market or channel differently than the company does Correct answer.
  4. has deliberately understated market growth to protect its clients

Explanation

Third-party market estimates often use a broader or narrower market definition, a different distribution channel, or units rather than dollars. Divergence between one company's reported growth and an industry estimate is expected until definitions are aligned.

Question 43Analysis, Modeling and Valuation

A DCF model forecasts free cash flow to the firm of $50 million in the final year of the explicit forecast period. The WACC is 9% and the perpetuity growth rate is 3%. Using the perpetuity growth method, the terminal value at the end of the forecast period is closest to:

  1. $833.3 million
  2. $572.2 million
  3. $555.6 million
  4. $858.3 million Correct answer.

Explanation

The perpetuity growth terminal value is TV = FCF(final year) × (1 + g) / (WACC − g), because the terminal value represents cash flows beginning in the year after the forecast ends. Here $50 × 1.03 / (0.09 − 0.03) = $858.3 million.

Question 44Analysis, Modeling and Valuation

When computing the weighted average cost of capital, the weight assigned to debt is normally based on:

  1. the face value of debt divided by the market value of equity
  2. the book value of debt divided by the book value of total capital
  3. the market value of debt divided by the sum of the market values of debt and equity Correct answer.
  4. the market value of equity divided by total assets

Explanation

WACC weights reflect the proportions of capital the firm actually uses at current market prices, so both debt and equity are measured at market value. Book or face values are used only when market values are unavailable, as a practical fallback.

Question 45Analysis, Modeling and Valuation

A stock is expected to pay a dividend of $2.00 per share next year. The required return on equity is 10% and dividends are expected to grow at a constant 4% per year. Under the Gordon growth model, the value per share is closest to:

  1. $20.00
  2. $50.00
  3. $34.67
  4. $33.33 Correct answer.

Explanation

The Gordon growth model values a share as the next expected dividend divided by the required return minus the growth rate: $2.00 / (0.10 − 0.04) = $33.33. The numerator is the dividend one year forward, not the most recently paid dividend.

Question 46Analysis, Modeling and Valuation

A company has a market capitalization of $500 million, total debt of $200 million, and cash of $50 million. Its enterprise value is closest to:

  1. $700 million
  2. $500 million
  3. $650 million Correct answer.
  4. $750 million

Explanation

Enterprise value measures the value of the operating business and equals equity value plus debt and other senior claims minus cash. Here $500 + $200 − $50 = $650 million.

Question 47Analysis, Modeling and Valuation

Under the capital asset pricing model, the cost of equity is calculated as:

  1. the risk-free rate plus beta times the equity risk premium Correct answer.
  2. the risk-free rate plus the equity risk premium
  3. the risk-free rate plus beta times the market return
  4. the pre-tax cost of debt times one minus the tax rate

Explanation

CAPM builds the cost of equity from a risk-free base plus a premium for systematic risk, scaled by beta: rf + β × (rm − rf). The equity risk premium is the market return minus the risk-free rate, not the market return itself.

Question 48Analysis, Modeling and Valuation

Free cash flow to the firm is best described as:

  1. net income plus depreciation minus capital expenditures minus the change in net working capital
  2. EBIT times one minus the tax rate, plus depreciation and amortization, minus capital expenditures, minus the increase in net working capital Correct answer.
  3. net income plus depreciation minus the change in net working capital
  4. EBITDA minus cash taxes minus interest expense

Explanation

Unlevered free cash flow starts with after-tax operating profit, adds back non-cash charges, and subtracts reinvestment in fixed and working capital. It excludes interest because it measures cash available to all capital providers.

Question 49Analysis, Modeling and Valuation

A forward P/E ratio differs from a trailing P/E ratio in that the forward ratio uses:

  1. the company's long-term sustainable earnings per share
  2. the most recent four quarters of reported earnings per share
  3. earnings per share adjusted only for nonrecurring items in the prior year
  4. the consensus estimate of earnings per share for the next four quarters Correct answer.

Explanation

A forward P/E divides the current share price by forecast earnings for the coming twelve months, while a trailing P/E uses reported earnings from the past twelve months. Forward multiples embed analyst expectations and are therefore more sensitive to estimate revisions.

Question 50Analysis, Modeling and Valuation

In a valuation model, sensitivity analysis is used to:

  1. show how the estimated value changes as one or more key inputs are varied Correct answer.
  2. assign probability weights to competing operating scenarios
  3. determine the single most likely valuation outcome
  4. measure the historical volatility of the company's reported earnings

Explanation

Sensitivity analysis recalculates the valuation across a range of assumptions, such as WACC and terminal growth, to reveal how dependent the result is on each input. It does not by itself assign probabilities to outcomes.