- CFA Exams
- CFA Level I Exam
- Study Session 7. Financial Reporting and Analysis (2)
- Reading 22. Understanding Balance Sheets
- Subject 5. Uses and Analysis of the Balance Sheet
CFA Practice Question
Which of the following is not a measure of liquidity?
A. Free cash flow
B. Operating income
C. Operating cycle
Explanation: Free cash flow is the excess of operating cash flow over basic needs.
User Contributed Comments 9
| User | Comment |
|---|---|
| Gina | EBIT - because it measures profitability |
| SDog | Free cash flow takes into account investment needs, which are long term cash flows. |
| gene80 | think becos operating income is not indicative of liquidity becos of the fact tt it does not reflect CAs vs CLs. It's off balance sheet. |
| CoffeeGirl | operating income , not a measure for liquidity |
| danrow | What is operating cycle? |
| dlukas | Operating cycle = no. days inventory + no. days receivables. It's a measure of working capital management. Make flash cards and learn your ratios. |
| shiva5555 | How is the operating cycle a measure of liquidity? Isn't it a measure of efficiency. |
| maria15 | dlukas: Isn't operating cycle = no. of days inventory+ no. of days receivables - no. of days payables? |
| tushi123 | operating cycle or cash conversion cycle is a measure of liquidity. cash flow is also a crucial item in measuring current ration, quick ration etc. operating income is not a measure of liquidity because it considers non cash items too |