Free CFA-Level-I Exam Braindumps (page: 460)

Page 460 of 991

Which of the following statements about ratios is false?

  1. Analysis of ratios can identify areas that require further investigation.
  2. All of these answers are true.
  3. A ratio expresses a mathematical relation between two, or more, economically important quantities.
  4. The advantage of ratio analysis is that very little skill is required in interpreting the meaning of the ratios.
  5. Ratios must be interpreted with care since factors affecting the numerator can correlate with those affecting the denominator.

Answer(s): D

Explanation:

The usefulness of ratio analysis is highly dependent upon skillful interpretation by the analyst.



An increase in accounts payable would be considered ________.

  1. a non-cash charge to income
  2. an adjusting entry
  3. a use of cash
  4. a source of cash

Answer(s): D

Explanation:

An increase in accounts payable shows a decrease in the outflow of cash.



The following financial statement depicts only one point in time:

  1. Income Statement
  2. Statement of Cash Flows
  3. Statement of Retained Earnings
  4. Balance Sheet

Answer(s): D

Explanation:

Only the balance sheet depicts the company's financial position at one point in time. All others show what happens over a certain period of time.



According to SFAC 5, the condition(s) that must be met for revenue recognition to take place is

  1. the ability to measure the revenue amount.
  2. there must be no remaining significant contingent obligation that pertains to the sale.
  3. the verbal or written agreement of the sale.
  4. the ability to recognized when the revenue actually takes place.
  5. the completion of the earnings process and assurance of payment.

Answer(s): E

Explanation:

The firm must have provided all or virtually all the goods/services for which it is to be paid and it must be possible to measure the total expected cost of providing these goods/services. Also, the seller must reasonably estimate the probability of nonpayment; if this cannot be assured, assurance of payment is not satisfied.



Page 460 of 991



Post your Comments and Discuss Test Prep CFA-Level-I exam with other Community members:

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