- CFA Exams
- CFA Level I Exam
- Study Session 7. Financial Reporting and Analysis (2)
- Reading 22. Understanding Balance Sheets
- Subject 1. Components and Format of the Balance Sheet
CFA Practice Question
A long-term asset is different from a long-term investment in stocks or subsidiaries primarily because a long-term asset ______
A. is used in operations and not for resale.
B. has physical substance.
C. is long-term in nature.
Explanation: The most correct statement is A. The primary difference between long-term assets and long-term investments in general is use in the operations of the business.
User Contributed Comments 3
| User | Comment |
|---|---|
| Rguerra | Some long term assets might not have physical substance. Ex: Acquired patent. |
| gaetmichel | explains why an "idle building" is not a long term asset, in aprevious question. considered as an investment |
| ascruggs92 | Stock subsidiary investments can be long term in nature, and a subsidiary typically has physical substance (i.e. employees, office space, etc.). Only A can be correct. |