QUESTION: 1629

An analysis of a firm's financial statements indicates that the average age of its assets is declining. This could be due to which of the following?

The firm is acquiring new assets with longer depreciable lives.
II. The firm's capital expenditures are outpacing depreciation.
III. The firm is not using its assets as intensively as it should.
IV. The firm is operating in its maturity phase.
I & IV
I & II
I, II, III & IV
III & IV

Answer(s): B

Explanation:

Note that the firm is likely not in a maturity or declining phase but in a growth phase, which is characterized by increasing capital investments.

Reveal Solution Next Question

QUESTION: 1630

A cash flow statement using the indirect method

is as informative as using the direct method.
begins with a firm's cash collections.
uses major categories of gross cash receipts and payments.
provides little new information into a firm's cash-generating ability.

Answer(s): D

Explanation:

Because of the indirect format, it is not possible to compare operating cash inflows and outflows by function with the revenue and expense activities that generated them.

Reveal Solution Next Question

QUESTION: 1631

The following are all true concerning transactional analysis, except,

it can be used to convert indirect method cash flow from operations to the direct method.
it is a technique that can be used to create a cash flow statement for firms that do not prepare such statements in accordance with SFAS 95 and IAS 7.
it helps to understand the relationship between the accrual of revenues, expenses, assets, and liabilities and their cash flow consequences.
it is a method that groups changes in the current assets and current liabilities and reconciles them to the relevant income statement items.
it is a method that classifies cash flows among operating, financing, and investing activities.

Answer(s): D

Explanation:

This method reconciles line-item changes in the balance sheet with their related income statement components to derive the cash flow consequences of the reported transactions and events.

Reveal Solution Next Question

QUESTION: 1632

The statement of cash flows cannot be used to

consider the interrelationship between cash flow components over time.
examine the trend of different cash flow components over time.
examine the cash flow components and their relationship to related income statement items.
review individual cash flow items for analytic significance.
examine the firm's ability to realize assets and settle liabilities.

Answer(s): E

Explanation:

Income statement and balance sheet data must be combined with cash flows for insights into the firm's ability to realize assets based on reported revenues and settle liabilities resulting from accrued expenses.

Reveal Solution Next Question

Free CFA-Level-I Exam Braindumps (page: 408)

QUESTION: 1629

Explanation:

QUESTION: 1630

Explanation:

QUESTION: 1631

Explanation:

QUESTION: 1632

Explanation: