CFA Practice Question

There are 334 practice questions for this study session.

CFA Practice Question

The acquisition method results in ______ than the pooling method.

I. greater depreciation expense
II. higher ROA
III. lower profit margin
IV. lower ROE
A. I and II
B. I, III and IV
C. III and IV
Explanation: The acquisition method results in lower ROA than the pooling method.

User Contributed Comments 6

User Comment
Luke41 unless acquisition is financed via equity issuance, wouldnt purchase result in higher roe?
dblueroom Generally acquisition method has lower NI in the numerator and larger equity in the denominator. thus ROE is much lower. Luke41, issuing new equity will increase Equity in the demoninator, resulting a lower ROE.
MSRus I suppose there is no need to know pooling method. Right?
Hishy MSRus I would tend to agree with you
somk "no need to know pooling method"?; count me in
davcer and remember that both GAAP and IFRS dont allow pooling method anymore
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