- CFA Exams
- CFA Level I Exam
- Topic 3. Financial Statement Analysis
- Learning Module 10. Intercorporate Investments
- Subject 4. Joint Ventures
CFA Practice Question
Under both the equity method and the proportionate consolidation method:
II. The total net assets are identical.
III. The total assets and liabilities are identical.
IV. The ratio analysis can be different.
I. The total sales and expenses are identical.
II. The total net assets are identical.
III. The total assets and liabilities are identical.
IV. The ratio analysis can be different.
Correct Answer: II and IV
III is false for a similar reason.
I is false. The total income recognized is identical but not the total sales and expenses.
III is false for a similar reason.
User Contributed Comments 4
| User | Comment |
|---|---|
| Clint | Is this question right? II appears wrong. |
| pranit | II is correct. Total net assets is shareholder's equity, which is identical under both methods. |
| actiger | Net assets = total assets - liability? |
| aravinda | Total net assets is also know as "net worth, share holder's equity OR owner's equity"... Total net worth = Total assets - total liability It is usually comprised of "capital stock + retained earnings"...in either methods (equity or proportionate consolidation), the net worth is same. |