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Test Prep CFA-Level-I Exam
CFA® Level I Chartered Financial Analyst (Page 143 )

Updated On: 11-Jan-2026
Page 143 of 793
PDF with 3963 Questions

Which of the following would not be included as a liability on a corporate balance sheet?

  1. Accrued liabilities
  2. Current portion of long-term debt
  3. Accounts payable
  4. Marketable securities
  5. Notes payable

Answer(s): D

Explanation:

Marketable securities are not a liability; it represents the value of a company's investment in stocks bonds and money market instruments.



The Income Statement:

  1. reflects the current operating performance of the firm.
    II. indicates whether the firm is healthy and growing or not.
    III. explains the changes in assets, liabilities and Equity of the firm.
    IV. is a snapshot of a firm's operations at a given time.
  2. I, II, III & IV
  3. II & III
  4. I only
  5. I & IV

Answer(s): C

Explanation:

II needs a cash flow statement, in addition. III is not true since the Income statement does not contain all the details which pertain to changes in assets and liabilities. Finally, an income statement shows the performance over a time period and is hence, not a "snapshot" of operations.



Which of the following is not a common tool used in financial statement analysis?

  1. trend series analysis
  2. random walk analysis
  3. common size statement analysis
  4. ratio analysis

Answer(s): B



When prices are rising, which of the following inventory valuation methods produces the lowest income tax liability?

  1. None of these answers
  2. LIFO
  3. Average cost
  4. FIFO

Answer(s): B

Explanation:

When prices are rising, LIFO will produce the lowest profit, and the lowest income tax liability, because the last in (highest cost) inventory is the first out. This leaves the oldest inventory on hand and since it has the lowest cost, ending inventory will have the lowest value which means that cost of goods sold will be the highest and profits will be the lowest (ending inventory = beginning inventory + net purchases - cost of goods sold).



What is the primary function of the Securities and Exchange Commission as it relates to a company's financial statements?

  1. None of these answers.
  2. To function as the standard-setting body of the accounting profession.
  3. To provide the investment public with completely independent and unbiased advice regarding the purchase of good quality public securities.
  4. To ensure that a public company makes full and accurate disclosure of all pertinent information relating to a company's business.

Answer(s): D

Explanation:

To ensure that a public company makes full and accurate disclosure in the company's registration statement of all pertinent information relating to a company's business, its securities, its financial position and earnings, and the underwriting arrangements.



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