Corporate Finance CFA Exam with ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
verified detailed answers ||\\//|| ||\\//||
Equity equals: - correct answer✔✔Assets - Liabilities ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Shareholders' equity reported on the balance sheet is most likely to differ from the market ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
value of shareholders' equity because: - correct answer✔✔some factors that affect the
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generation of future cash flows are excluded. ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
All of the following are current assets except: - correct answer✔✔goodwill.
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The most likely costs included in both the cost of inventory and property, plant, and
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equipment are: - correct answer✔✔delivery costs. ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Debt due within one year is considered: - correct answer✔✔current.
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The carrying value of inventories reflects: - correct answer✔✔the lower of historical cost or
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
net realizable value
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Accrued expenses (accrued liabilities) are: - correct answer✔✔expenses that have been ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
reported on the income statement but not yet paid ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
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 most likely result in ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
an increase for that company in: - correct answer✔✔both the debt-to-equity ratio and the
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
total asset turnover. ||\\//|| ||\\//||
, The item "retained earnings" is a component of: - correct answer✔✔shareholders' equity.
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When a company buys shares of its own stock to be held in treasury, it records a reduction
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
in: - correct answer✔✔both assets and shareholders' equity.
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Which of the following would an analyst most likely be able to determine from a common-
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size analysis of a company's balance sheet over several periods? - correct answer✔✔An
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
increase or decrease in financial leverage. ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
An investor concerned whether a company can meet its near-term obligations is most likely
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
to calculate the: - correct answer✔✔current ratio.
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The most stringent test of a company's liquidity is its: - correct answer✔✔cash ratio.
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An investor worried about a company's long-term solvency would most likely examine its: -
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correct answer✔✔debt-to-equity ratio. ||\\//|| ||\\//||
Based on Exhibit 1, which statement is most likely correct? - correct answer✔✔Company A
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
has made one or more acquisitions.
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Based on Exhibit 1, the financial leverage ratio for Company B is closest to: - correct
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
answer✔✔2.22.
Based on Exhibit 1, which ratio indicates lower liquidity risk for Company A compared
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
with Company B? - correct answer✔✔Cash ratio ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
In order to assess a company's ability to fulfill its long-term obligations, an analyst would
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
most likely examine: - correct answer✔✔solvency ratios.
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verified detailed answers ||\\//|| ||\\//||
Equity equals: - correct answer✔✔Assets - Liabilities ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Shareholders' equity reported on the balance sheet is most likely to differ from the market ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
value of shareholders' equity because: - correct answer✔✔some factors that affect the
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
generation of future cash flows are excluded. ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
All of the following are current assets except: - correct answer✔✔goodwill.
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
The most likely costs included in both the cost of inventory and property, plant, and
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
equipment are: - correct answer✔✔delivery costs. ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Debt due within one year is considered: - correct answer✔✔current.
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
The carrying value of inventories reflects: - correct answer✔✔the lower of historical cost or
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
net realizable value
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Accrued expenses (accrued liabilities) are: - correct answer✔✔expenses that have been ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
reported on the income statement but not yet paid ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
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 most likely result in ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
an increase for that company in: - correct answer✔✔both the debt-to-equity ratio and the
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
total asset turnover. ||\\//|| ||\\//||
, The item "retained earnings" is a component of: - correct answer✔✔shareholders' equity.
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
When a company buys shares of its own stock to be held in treasury, it records a reduction
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
in: - correct answer✔✔both assets and shareholders' equity.
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
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? - correct answer✔✔An
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
increase or decrease in financial leverage. ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
An investor concerned whether a company can meet its near-term obligations is most likely
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
to calculate the: - correct answer✔✔current ratio.
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
The most stringent test of a company's liquidity is its: - correct answer✔✔cash ratio.
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
An investor worried about a company's long-term solvency would most likely examine its: -
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
correct answer✔✔debt-to-equity ratio. ||\\//|| ||\\//||
Based on Exhibit 1, which statement is most likely correct? - correct answer✔✔Company A
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
has made one or more acquisitions.
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
Based on Exhibit 1, the financial leverage ratio for Company B is closest to: - correct
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
answer✔✔2.22.
Based on Exhibit 1, which ratio indicates lower liquidity risk for Company A compared
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
with Company B? - correct answer✔✔Cash ratio ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
In order to assess a company's ability to fulfill its long-term obligations, an analyst would
||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//|| ||\\//||
most likely examine: - correct answer✔✔solvency ratios.
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