- CFA Exams
- CFA Level I Exam
- Study Session 6. Financial Reporting and Analysis (1)
- Reading 19. Introduction to Financial Statement Analysis
- Subject 3. Other Financial Information Sources
CFA Practice Question
Which of the following ratios, when calculated using interim financial reports, would be least questionable?
A. Receivable Turnover (Net Sales / Average Accounts Receivable)
B. Current Ratio (Current Assets / Current Liabilities)
C. Return on Assets (Net Income / Average Total Assets)
Explanation: Ratios calculated from interim financial reports that use one balance sheet account and one income statement or statement of cash flows account are questionable because the income statement and statement of cash flows values represent accumulated amounts for less than one year, while the balance sheet values are full values similar to those at year end. The current ratio would be the least questionable ratio because it is calculated using two balance sheet accounts.
User Contributed Comments 3
| User | Comment |
|---|---|
| gaetmichel | thought Sales & Receivables were less sujbect to manipulation, as top line items ?! |
| Criticull | you could manage receivables easily. |
| farhan92 | a BS is a snapshot at a certain point in time so ratios from just the BS would be consistent the other two are a mix and match of items from BS/IS |