CFA Practice Question

There are 86 practice questions for this study session.

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
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