- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 7. Analysis of Long-Term Assets
- Subject 2. Impairment of Assets
CFA Practice Question
Asset revaluation ______
II. can be used by management to manage earnings.
III. affects depreciation, total assets, and shareholders' equity.
I. always reduces reported leverage.
II. can be used by management to manage earnings.
III. affects depreciation, total assets, and shareholders' equity.
Correct Answer: II and III
I is false; only an upward revaluation can be used to reduce reported leverage.
User Contributed Comments 7
| User | Comment |
|---|---|
| boddunah | done finally with this chapter .wow a lot to memorize. |
| bantoo | Great questions for practice Lot to memorise. |
| moneyguy | How does an upward revaluation reduce reported leverage? |
| johntan1979 | Increased asset value ==> leverage is asset/equity |
| Adon | upward revaluation increases assets and equity equally. since leverage is almost always positive, increasing numerator and denominator equally will reduce the fraction (4/3 is less than 3/2) |
| Shaan23 | How are you done this chapter? There's like three more sections. |
| ashish100 | lol ^ |