CFA Practice Question

There are 334 practice questions for this study session.

CFA Practice Question

Which of the following statements about the accounts receivable turnover ratio is true in a period of an appreciating local currency and the use of the current rate method?

A. The current rate method results in a lower accounts receivable turnover ratio than the temporal method.
B. The current rate method results in a higher accounts receivable turnover ratio than the temporal method.
C. The accounts receivable turnover ratio is the same under either method.
Correct Answer: C

Accounts receivable are a monetary asset. As a result, receivables are translated and remeasured at the same current exchange rate. Sales, as well, are translated and remeasured at the same average exchange rate. The accounts receivable turnover rate will, therefore, be the same under both methods.

User Contributed Comments 2

User Comment
bananabun2 i thought they said all assets and liabilities as translated at current rate? How come AR is translated at average rate?
danlan2 AR is translated at current rate.
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