CFA Exam questions and verified answers
Equity equals: - Assets - Liabilities = Equity
(4)Shareholders' equity reported on the balance sheet is most likely to differ from
the market value of shareholders' equity because: - B)Some factors that affect the
generation of future cash flows are excluded.
(8)All of the following are current assets except: - B)goodwill.
(9)The most likely costs included in both the cost of inventory and property, plant,
and equipment are: - C) delivery costs.
(10)Debt due within one year is considered: - A)current.
(13)The carrying value of inventories reflects: - C) the lower of historical cost or
net realizable value.
(15)Accrued expenses (accrued liabilities) are: - C) expenses that have been
reported on the income statement but not yet paid.
(17)Defining total asset turnover as revenue divided by average total assets, all
else equal, impairment write-downs of long-lived assets owned by a company will
,CFA Exam questions and verified answers
most likelyresult in an increase for that company in: - C)both the debt-to-equity
ratio and the total asset turnover.
(23)The item "retained earnings" is a component of: - C)shareholders' equity.
(24)When a company buys shares of its own stock to be held in treasury, it records
a reduction in: - B)both assets and shareholders' equity.
(25)Which of the following would an analyst most likely be able to determine from
a common-size analysis of a company's balance sheet over several periods? - B)An
increase or decrease in financial leverage.
(26)An investor concerned whether a company can meet its near-term obligations
is most likely to calculate the: - A)current ratio.
(27)The most stringent test of a company's liquidity is its: - A)cash ratio.
(28)An investor worried about a company's long-term solvency would most likely
examine its: - C) debt-to-equity ratio.
, CFA Exam questions and verified answers
(31)Based on Exhibit 1, which statement is most likely correct? - C)Company A has
made one or more acquisitions.
(33)Based on Exhibit 1, the financial leverage ratio for Company B is closest to: -
C)2.22.
(34)Based on Exhibit 1, which ratio indicates lower liquidity risk for Company A
compared with Company B? - A)Cash ratio
1. The three factor DuPont Analysis is comprised of - a. Asset turnover, profit
margin, financial leverage
1. Within the Dupont Analysis - a. An increase in financial leverage is met with an
increase in the use of debt.
1. In DuPont Analysis where the financial leverage has consistently increased over
the past several years - a. The ROE will be higher than the ROA.
1. The current ROA of a firm is 13% and it has an Equity Multiplier of 3.0. The
resulting ROE will be approximately - a. 39%
Equity equals: - Assets - Liabilities = Equity
(4)Shareholders' equity reported on the balance sheet is most likely to differ from
the market value of shareholders' equity because: - B)Some factors that affect the
generation of future cash flows are excluded.
(8)All of the following are current assets except: - B)goodwill.
(9)The most likely costs included in both the cost of inventory and property, plant,
and equipment are: - C) delivery costs.
(10)Debt due within one year is considered: - A)current.
(13)The carrying value of inventories reflects: - C) the lower of historical cost or
net realizable value.
(15)Accrued expenses (accrued liabilities) are: - C) expenses that have been
reported on the income statement but not yet paid.
(17)Defining total asset turnover as revenue divided by average total assets, all
else equal, impairment write-downs of long-lived assets owned by a company will
,CFA Exam questions and verified answers
most likelyresult in an increase for that company in: - C)both the debt-to-equity
ratio and the total asset turnover.
(23)The item "retained earnings" is a component of: - C)shareholders' equity.
(24)When a company buys shares of its own stock to be held in treasury, it records
a reduction in: - B)both assets and shareholders' equity.
(25)Which of the following would an analyst most likely be able to determine from
a common-size analysis of a company's balance sheet over several periods? - B)An
increase or decrease in financial leverage.
(26)An investor concerned whether a company can meet its near-term obligations
is most likely to calculate the: - A)current ratio.
(27)The most stringent test of a company's liquidity is its: - A)cash ratio.
(28)An investor worried about a company's long-term solvency would most likely
examine its: - C) debt-to-equity ratio.
, CFA Exam questions and verified answers
(31)Based on Exhibit 1, which statement is most likely correct? - C)Company A has
made one or more acquisitions.
(33)Based on Exhibit 1, the financial leverage ratio for Company B is closest to: -
C)2.22.
(34)Based on Exhibit 1, which ratio indicates lower liquidity risk for Company A
compared with Company B? - A)Cash ratio
1. The three factor DuPont Analysis is comprised of - a. Asset turnover, profit
margin, financial leverage
1. Within the Dupont Analysis - a. An increase in financial leverage is met with an
increase in the use of debt.
1. In DuPont Analysis where the financial leverage has consistently increased over
the past several years - a. The ROE will be higher than the ROA.
1. The current ROA of a firm is 13% and it has an Equity Multiplier of 3.0. The
resulting ROE will be approximately - a. 39%
