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CFA Level 1 FRA Questions and Answers, Exams of Mathematics

Massachusetts Institute of Technology (MIT)Mathematics

CFA Level 1 FRA Questions and Answers. Current Ratio - ✔ Current Assets divided by current liabilities Quick Ratio - ✔ Cash plus marketable securities plus receivables divided by current liabilities Cash Ratio - ✔ Cash plus marketable securities divided by current liabilities Defensive Interval Ratio - ✔ Cash plus marketable securities plus receivables divided by average daily expenditures Cash Conversion cycle - ✔ days in inventory plus days in accounts receivables minus days in accou

Typology: Exams

2021/2022

Available from 01/12/2023

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CFA Level 1 FRA Questions and
Answers .
Current Ratio - ✔ Current Assets divided by current liabilities
Quick Ratio - ✔ Cash plus marketable securities plus receivables divided by current
liabilities
Cash Ratio - ✔ Cash plus marketable securities divided by current liabilities
Defensive Interval Ratio - ✔ Cash plus marketable securities plus receivables divided
by average daily expenditures
Cash Conversion cycle - ✔ days in inventory plus days in accounts receivables minus
days in accounts payable
Accounts receivable turnover - ✔ revenue divided by average accounts receivable
inventory turnover - ✔ cost of goods sold divided by average inventory
Accounts payable turnover - ✔ purchases divided by average accounts payable
Cost of Goods Sold - ✔ Beginning inventory plus purchases minus ending inventory
Operating cycle - ✔ days in inventory plus days in accounts receivable
Fixed asset turnover - ✔ revenue divided by average net fixed assets
working capital turnover - ✔ revenue divided by average working capital
equity turnover - ✔ revenue divided by average equity
debt to equity ratio - ✔ total debt divided by total equity
debt ratio - ✔ total debt divided by total assets
debt to total capital ratio - ✔ total debt divided by total debt plus total equity
Financial leverage ratio - ✔ average total assets divided by average total equity
interest coverage ratio - ✔ EBIT divided by interest payments
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CFA Level 1 FRA Questions and

Answers.

Current Ratio - ✔ Current Assets divided by current liabilities Quick Ratio - ✔ Cash plus marketable securities plus receivables divided by current liabilities Cash Ratio - ✔ Cash plus marketable securities divided by current liabilities Defensive Interval Ratio - ✔ Cash plus marketable securities plus receivables divided by average daily expenditures Cash Conversion cycle - ✔ days in inventory plus days in accounts receivables minus days in accounts payable Accounts receivable turnover - ✔ revenue divided by average accounts receivable inventory turnover - ✔ cost of goods sold divided by average inventory Accounts payable turnover - ✔ purchases divided by average accounts payable Cost of Goods Sold - ✔ Beginning inventory plus purchases minus ending inventory Operating cycle - ✔ days in inventory plus days in accounts receivable Fixed asset turnover - ✔ revenue divided by average net fixed assets working capital turnover - ✔ revenue divided by average working capital equity turnover - ✔ revenue divided by average equity debt to equity ratio - ✔ total debt divided by total equity debt ratio - ✔ total debt divided by total assets debt to total capital ratio - ✔ total debt divided by total debt plus total equity Financial leverage ratio - ✔ average total assets divided by average total equity interest coverage ratio - ✔ EBIT divided by interest payments

Fixed charge coverage ratio - ✔ EBIT plus lease payments divided by interest payments plus lease payments Gross profit - ✔ Sales minus cost of goods sold Gross profit margin - ✔ gross profit divided by revenue operating profit margin - ✔ operating profit divided by revenue pretax margin - ✔ earnings before tax divided by revenue Net profit margin - ✔ net income divided by revenue Return on assets - ✔ net income divided by average total assets Return on Assets - ✔ EBIT divided by average total assets operating return on assets - ✔ operating profit divided by average total assets return on total capital - ✔ EBIT divided by average total capital Return on Equity - ✔ net income divided by average total equity Return on Equity - ✔ Return on Assets times financial leverage Return on Equity - ✔ Net profit margin times asset turnover times leverage ratio Return on common equity - ✔ net income minus preferred dividends divided by average common equity DuPont Formula - ✔ Net profit margin times total asset turnover times leverage Net Profit margin - ✔ net income divided by revenue Total asset turnover - ✔ Revenue divided by average assets Leverage - ✔ Average assets divided by average equity Extended DuPont Formula - ✔ Tax burden times interest burden times operating profit margin times asset turnover times leverage Tax burden - ✔ Earnings after tax divided by earnings before tax Interest burden - ✔ Earnings before tax divided by EBIT Operating profit margin - ✔ EBIT divided by revenue

Measurement of Inventory with GAAP - ✔ inventory is reported on the balance sheet at the lower of cost or market Market Value - ✔ usually equal to replacement cost but cannot be greater than net realizable value or less than net realizable value minus a normal profit margin Identifiable intangible asset under IFRS - ✔ Must be capable of being separated from the firm or arise from a contractual or legal right. Must be controlled by the firm. Must be expected to provide future economic benefits Unidentifiable intangible asset - ✔ cannot be purchased separately and may have an indefinite life -- Goodwill Research Costs - ✔ Under IFRS research costs are expensed as incurred Under GAAP research costs are expensed as incurred Development Costs - ✔ Under IFRS development costs may be capitalized Under GAAP development costs are expensed as incurred Capitalize cost - ✔ list the expenditure as an asset on the balance sheet. Allocate to the income statement through depreciation or amortization of expense Expense Cost - ✔ allocate expenditure to income statement in the period incurred Internally generated goodwill - ✔ expensed in the period incurred Carrying or book value - ✔ The net value of an asset or liability on the balance sheet. For property, plant and equipment, carrying value equals historical cost minus accumulated depreciation Straight-line Depreciation - ✔ original cost - salvage value divided by depreciable life Double declining balance - ✔ 2 divided by depreciable life in years times book value at beginning of year x output units in the period Units of production - ✔ original cost - salvage value divided by life in output units times output units in the period Component Depreciation under IFRS - ✔ requires firm to depreciate the components of an asset separately Component Depreciation under GAAP - ✔ allowed under GAAP but is seldom used Revaluation model - ✔ IFRS alternative that permits a long-lived asset to be reported at its fair value, as long as an active market exists for the asset

Revaluation surplus - ✔ an increase in an assets value above historical cost is not reported as a gain in the income statement but as a component of shareholders' equity in the revaluation surplus account Recoverability - ✔ Under GAAP an asset is considered impaired if the carrying value is greater than the asset's future UNDISCOUNTED cash flow stream Loss measurement under GAAP - ✔ If imparied, the asset's value is written down to fair value on the balance sheet and a loss, equal to the excess of carrying value over the fair value or the discounted value of future cash flows is recognized in the income statement Impaired - ✔ Asset is impaired if its carrying value exceeds its net realizable value which is fair value minus selling costs IFRS criteria for finance lease - ✔ title of the leased asset is transferred to the lessee at the end of the lease IFRS criteria for finance lease - ✔ Lessee can purchase the leased asset for a price that is significantly lower than the fair value of the asset IFRS criteria for finance lease - ✔ The lease term covers a major portion of the asset's economic life IFRS criteria for finance lease - ✔ The present value of the lease payments is substantially equal to the fair value of the leased asset IFRS criteria for finance lease - ✔ the leased asset is so specialized that only the lessee can use the asset without significant modifications GAAP criteria for finance lease - ✔ title to the leased asset is transferred to the lessee at the end of the lease period GAAP criteria for finance lease - ✔ A bargain purchase option permits the lessee to purchase the leased asset for a price that is significantly lower than fair market value GAAP criteria for finance lease - ✔ The lease period is 75% or more of the asset's economic life GAAP criteria for finance lease - ✔ The present value of the lease payments is 90% or more of the fair value of the leased asset Capitalized Inventory Costs - ✔ Include purchase cost, conversion or manufacturing costs which include labor and overhead, and other costs to bring inventory to its present state and location