- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 3. Analyzing Balance Sheets
- Subject 5. Ratios and Common-Size Analysis
CFA Practice Question
______ is considered to be a liquidity ratio.
II. The fixed asset turnover
III. The cash ratio
IV. The times interest earned ratio
V. The profit margin
I. The return on assets
II. The fixed asset turnover
III. The cash ratio
IV. The times interest earned ratio
V. The profit margin
Correct Answer: III only
User Contributed Comments 7
| User | Comment |
|---|---|
| morpheus918 | What about IV? They can't be too liquid if their times interest earned ratio is in the crapper! |
| tony1973 | Not IV as it is a financial risk ratio. |
| Shelton | How about II? |
| CFAnext | fixed assets dont tell muchs about liquidity of a firm. e.g. if fixed assest ratio is high, i.e. high return per fixed asset, it would help us judge how "liquid" the asset is! |
| nagri | CFAnext, you cannot judge about their liquidity, from fixed assets turnover ratio, you can judge about their efficiency in generating the sales. |
| reganbaha | Can't use fixed asset ratio as a measure of short term liquidity. Many a company has gone into administration with a lot of valuable fixed assets. Hence the term; asset rich, cash poor. |
| johntan1979 | Liquidity ratios: Current ratio Quick or Acid test ratio Cash ratio That's it and that's all folks! |