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Basic Question 8 of 8
Which ratio is the most important factor to indicate that a company has plenty of financial capacity to add more debt if there is an investment reason?
B. A big cash flow interest coverage ratio.
C. A big operating cash flow to net income ratio.
A. A big profit margin.
B. A big cash flow interest coverage ratio.
C. A big operating cash flow to net income ratio.
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I passed! I did not get a chance to tell you before the exam - but your site was excellent. I will definitely take it next year for Level II.
Tamara Schultz
Learning Outcome Statements
identify financial reporting choices and biases that affect the quality and comparability of companies' financial statements and explain how such biases may affect financial decisions;
evaluate the quality of a company's financial data and recommend appropriate adjustments to improve quality and comparability with similar companies, including adjustments for differences in accounting standards, methods, and assumptions;
evaluate how a given change in accounting standards, methods, or assumptions affects financial statements and ratios;
analyze and interpret how balance sheet modifications, earnings normalization, and cash flow statement related modifications affect a company's financial statements, financial ratios, and overall financial condition.
CFA® 2025 Level II Curriculum, Volume 2, Module 15.