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CFA Study Session 7: Financial Reporting & Analysis - Exercises and Questions, Exams of Mathematical finance

Nashville State Community CollegeMathematical finance

A series of multiple-choice questions related to financial reporting and analysis, covering topics such as expense classification, revenue recognition, inventory methods, depreciation, and earnings per share. The questions are designed to test understanding of key concepts and principles within the cfa curriculum. This resource can be valuable for students preparing for the cfa exam or anyone seeking to deepen their knowledge of financial reporting and analysis.

Typology: Exams

2024/2025

Available from 03/09/2025

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CFA study session 7: Financial reporting & analysis
Study online at https://quizlet.com/_4n7lpd
1. Expenses on the income statement may be grouped by:
A. nature, but not by function.
B. function, but not by nature.
C. either function or nature.: C. either function or nature.
2. An example of an expense classification by function is:
A. tax expense.
B. interest expense.
C. cost of goods sold.: C. cost of goods sold.
3. Denali Limited, a manufacturing company, had the following income state-
ment information:
Revenue $4,000,000
Cost of goods sold $3,000,000
Other operating expenses $500,000
Interest expense $100,000
Tax expense $120,000
Denali's gross profit is equal to
A. $280,000.
B. $500,000.
C. $1,000,000.: C. $1,000,000.
4. Under IFRS, income includes increases in economic benefits from:
A. increases in liabilities not related to owners' contributions.
B. enhancements of assets not related to owners' contributions.
C. increases in owners' equity related to owners' contributions,: B. enhance-
ments of assets not related to owners' contributions.
5. Fairplay had the following information related to the sale of its products
during 2009, which was its first year of business:
Revenue $1,000,000
Returns of goods sold $100,000
Cash collected $800,000
Cost of goods sold $700,000
Under the accrual basis of accounting, how much net revenue would be
reported on Fairplay's 2009 income statement?
A. $200,000.
B. $900,000.
C. $1,000,000.: B. $900,000. (1m - 100k)
6. If the outcome of a long-term contract can be measured reliably, the pre-
ferred accounting method under both IFRS and US GAAP is:
A. the cost recovery method.
B. the completed contract method.
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Download CFA Study Session 7: Financial Reporting & Analysis - Exercises and Questions and more Exams Mathematical finance in PDF only on Docsity!

Study online at https://quizlet.com/_4n7lpd

  1. Expenses on the income statement may be grouped by: A. nature, but not by function. B. function, but not by nature. C. either function or nature.: C. either function or nature.
  2. An example of an expense classification by function is: A. tax expense. B. interest expense. C. cost of goods sold.: C. cost of goods sold.
  3. Denali Limited, a manufacturing company, had the following income state- ment information: Revenue $4,000, Cost of goods sold $3,000, Other operating expenses $500, Interest expense $100, Tax expense $120, Denali's gross profit is equal to A. $280,000. B. $500,000. C. $1,000,000.: C. $1,000,000.
  4. Under IFRS, income includes increases in economic benefits from: A. increases in liabilities not related to owners' contributions. B. enhancements of assets not related to owners' contributions. C. increases in owners' equity related to owners' contributions,: B. enhance- ments of assets not related to owners' contributions.
  5. Fairplay had the following information related to the sale of its products during 2009, which was its first year of business: Revenue $1,000, Returns of goods sold $100, Cash collected $800, Cost of goods sold $700, Under the accrual basis of accounting, how much net revenue would be reported on Fairplay's 2009 income statement? A. $200,000. B. $900,000. C. $1,000,000.: B. $900,000. (1m - 100k)
  6. If the outcome of a long-term contract can be measured reliably, the pre- ferred accounting method under both IFRS and US GAAP is: A. the cost recovery method. B. the completed contract method.

Study online at https://quizlet.com/_4n7lpd C. the percentage-of-completion method.: C. the percentage-of-completion method.

  1. At the beginning of 2009, Florida Road Construction entered into a contract to build a road for the government. Construction will take four years. The following information as of 31 December 2009 is available for the contract: Total revenue according to contract $10,000, Total expected cost $8,000, Cost incurred during 2009 $1,200, Assume that the company estimates percentage complete based on costs in- curred as a percentage of total estimated costs. Under the completed contract method, how much revenue will be reported in 2009? A. None. B. $300,000. C. $1,500,000.: A. None.
  2. During 2009, Argo Company sold 10 acres of prime commercial zoned land to a builder for $5,000,000. The builder gave Argo a $1,000,000 down payment and will pay the remaining balance of $4,000,000 to Argo in 2010. Argo purchased the land in 2002 for $2,000,000. Using the installment method, how much profit will Argo report for 2009? A. $600,000. B. $1,000,000. C. $3,000,000.: A. $600,000. (([5m-2m]/5m)*1m)
  3. During 2009, Argo Company sold 10 acres of prime commercial zoned land to a builder for $5,000,000. The builder gave Argo a $1,000,000 down payment and will pay the remaining balance of $4,000,000 to Argo in 2010. Argo purchased the land in 2002 for $2,000,000. How much profit will Argo report for 2009 using the cost recovery method? A. None. B. $600,000. C. $1,000,000.: A. None. (1m < 2m)
  4. Under IFRS, revenue from barter transactions should be measured based on the fair value of revenue from: A. similar barter transactions with unrelated parties. B. similar non-barter transactions with related parties. C. similar non-barter transactions with unrelated parties.: C. similar non-barter transactions with unrelated parties.
  5. Apex Consignment sells items over the internet for individuals on a con- signment basis. Apex receives the items from the owner, lists them for sale on the internet, and receives a 25 percent commission for any items sold.

Study online at https://quizlet.com/_4n7lpd

  1. Which inventory method is least likely to be used under IFRS? A. First in, first out (FIFO). B. Last in, first out (LIFO). C. Weighted average.: B. Last in, first out (LIFO). (not permitted under IFRS)
  2. At the beginning of 2009, Glass Manufacturing purchased a new machine for its assembly line at a cost of $600,000. The machine has an estimated useful life of 10 years and estimated residual value of $50,000. Under the straight-line method, how much depreciation would Glass take in 2010 for financial reporting purposes? A. $55,000. B. $60,000. C. $65,000.: A. $55,000.
  3. At the beginning of 2009, Glass Manufacturing purchased a new machine for its assembly line at a cost of $600,000. The machine has an estimated useful life of 10 years and estimated residual value of $50,000. How much depreciation would Glass take in 2009 for financial reporting purposes under the double-declining balance method? A. $60,000. B. $110,000. C. $120,000.: C. $120,000. (600k / [2(10)])
  4. Which combination of depreciation methods and useful lives is most conservative in the year a depreciable asset is acquired? A. Straight-line depreciation with a short useful life. B. Declining balance depreciation with a long useful life. C. Declining balance depreciation with a short useful life.: C. Declining balance depreciation with a short useful life. (This would result in the highest amount of depreciation in the first year and hence the lowest amount of net income relative to the other choices.)
  5. Under IFRS, a loss from the destruction of property in a fire would most likely be classified as: A. continuing operations. B. discontinued operations. C. other comprehensive income.: A. continuing operations.
  6. A company chooses to change an accounting policy. This change requires that, if practical, the company restate its financial statements for: A. all prior periods. B. current and future periods. C. prior periods shown in a report.: C. prior periods shown in a report.

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  1. For 2009, Flamingo Products had net income of $1,000,000. At 1 January 2009, there were 1,000,000 shares outstanding. On 1 July 2009, the company issued 100,000 new shares for $20 per share. The company paid $200,000 in dividends to common shareholders. What is Flamingo's basic earnings per share for 2009? A. $0.80. B. $0.91. C. $0.95.: C. $0.95. ($1m / [(1m x .5) + (.1m x .5)])
  2. For its fiscal year-end, Calvan Water Corporation (CWC) reported net in- come of $12 million and a weighted average of 2,000,000 common shares out- standing. The company paid $800,000 in preferred dividends and had 100, options outstanding with an average exercise price of $20. CWC's market price over the year averaged $25 per share. CWC's diluted EPS is closest to: A. $5.33. B. $5.54. C. $5.94.: B. $5.54.
  3. A company with no debt or convertible securities issued publicly traded common stock three times during the current fiscal year. Under both IFRS and US GAAP, the company's: A. basic EPS equals its diluted EPS. B. capital structure is considered complex at year-end. C. basic EPS is calculated by using a simple average number of shares outstanding.: A. basic EPS equals its diluted EPS. (A company that issues only common stock, with no financial instruments that are potentially convertible into common stock has a simple capital structure)
  4. Laurelli Builders (LB) reported the following financial data for year-end 31 December: Common shares outstanding, 1 January 2,020, Common shares issued as stock dividend, 1 June 380, Warrants outstanding, 1 January 500, Net income $3,350, Preferred stock dividends paid $430, Common stock dividends paid $240, Which statement about the calculation of LB's EPS is most accurate? A. LB's basic EPS is $1.12. B. LB's diluted EPS is equal to or less than its basic EPS. C. The weighted average number of shares outstanding is 2,210,000.: B. LB's diluted EPS is equal to or less than its basic EPS.

Study online at https://quizlet.com/_4n7lpd Workhard's comprehensive income for the year: A. is $18 million. B. is increased by the derivatives accounted for as hedges. C. includes $4 million in other comprehensive income.: C. includes $4 million in other comprehensive income.

  1. When preparing an income statement, which of the following items would most likely be classified as other comprehensive income? A. A foreign currency translation adjustment B. An unrealized gain on a security held for trading purposes C. A realized gain on a derivative contract not accounted for as a hedge: A. A foreign currency translation adjustment
  2. Resources controlled by a company as a result of past events are: A. equity. B. assets. C. liabilities.: B. assets.
  3. Equity equals: A. Assets - Liabilities. B. Liabilities - Assets. C. Assets + Liabilities.: A. Assets - Liabilities.
  4. Distinguishing between current and non-current items on the balance sheet and presenting a subtotal for current assets and liabilities is referred to as: A. a classified balance sheet. B. an unclassified balance sheet. C. a liquidity-based balance sheet.: A. a classified balance sheet.
  5. Shareholders' equity reported on the balance sheet is most likely to differ from the market value of shareholders' equity because: A. historical cost basis is used for all assets and liabilities. B. some factors that affect the generation of future cash flows are excluded. C. shareholders' equity reported on the balance sheet is updated continuous- ly.: B. some factors that affect the generation of future cash flows are excluded.
  6. The information provided by a balance sheet item is limited because of uncertainty regarding: A. measurement of its cost or value with reliability. B. the change in current value following the end of the reporting period. C. the probability that any future economic benefit will flow to or from the entity.: B. the change in current value following the end of the reporting period.
  7. Which of the following is most likely classified as a current liability? A. Payment received for a product due to be delivered at least one year after

Study online at https://quizlet.com/_4n7lpd the balance sheet date B. Payments for merchandise due at least one year after the balance sheet date but still within a normal operating cycle C. Payment on debt due in six months for which the company has the uncon- ditional right to defer settlement for at least one year after the balance sheet date: B. Payments for merchandise due at least one year after the balance sheet date but still within a normal operating cycle

  1. The most likely company to use a liquidity-based balance sheet presenta- tion is a: A. bank. B. computer manufacturer holding inventories. C. software company with trade receivables and payables.: A. bank.
  2. All of the following are current assets except: A. cash. B. goodwill. C. inventories.: B. goodwill.
  3. The most likely costs included in both the cost of inventory and property, plant, and equipment are: A. selling costs. B. storage costs. C. delivery costs.: C. delivery costs
  4. Debt due within one year is considered: A. current. B. preferred. C. convertible.: A. current.
  5. Money received from customers for products to be delivered in the future is recorded as: A. revenue and an asset. B. an asset and a liability. C. revenue and a liability.: B. an asset and a liability.
  6. An example of a contra asset account is: A. depreciation expense. B. sales returns and allowances. C. allowance for doubtful accounts.: C. allowance for doubtful accounts.
  7. The carrying value of inventories reflects: A. their historical cost. B. their current value. C. the lower of historical cost or net realizable value.: C. the lower of historical cost or net realizable value.

Study online at https://quizlet.com/_4n7lpd B. They flow through retained earnings. C. They are a component of accumulated other comprehensive income.: C. They are a component of accumulated other comprehensive income.

  1. For financial assets classified as held to maturity, how are unrealized gains and losses reflected in shareholders' equity? A. They are not recognized. B. They flow through retained earnings. C. They are a component of accumulated other comprehensive income.: A. They are not recognized. (recognized only when realized)
  2. The non-controlling (minority) interest in consolidated subsidiaries is pre- sented on the balance sheet: A. as a long-term liability. B. separately, but as a part of shareholders' equity. C. as a mezzanine item between liabilities and shareholders' equity.: B. sepa- rately, but as a part of shareholders' equity.
  3. The item "retained earnings" is a component of: A. assets. B. liabilities. C. shareholders' equity.: C. shareholders' equity.
  4. When a company buys shares of its own stock to be held in treasury, it records a reduction in: A. both assets and liabilities. B. both assets and shareholders' equity. C. assets and an increase in shareholders' equity.: B. both assets and share- holders' equity.
  5. Which of the following would an analyst most likely be able to determine from a common-size analysis of a company's balance sheet over several periods? A. An increase or decrease in sales. B. An increase or decrease in financial leverage. C. A more efficient or less efficient use of assets.: B. An increase or decrease in financial leverage.
  6. An investor concerned whether a company can meet its near-term obliga- tions is most likely to calculate the: A. current ratio. B. return on total capital. C. financial leverage ratio: A. current ratio.
  7. The most stringent test of a company's liquidity is its: A. cash ratio.

Study online at https://quizlet.com/_4n7lpd B. quick ratio. C. current ratio.: A. cash ratio.

  1. An investor worried about a company's long-term solvency would most likely examine its: A. current ratio. B. return on equity. C. debt-to-equity ratio.: C. debt-to-equity ratio.
  2. Using the information presented in Exhibit 4 (REFER TO PAGES 223-224), the quick ratio for SAP Group at 31 December 2009 is closest to: A. 1.01. B. 1.44. C. 1.54.: B. 1.44.
  3. Using the information presented in Exhibit 12 (REFER TO PAGES 245-246), the financial leverage ratio for SAP Group at 31 December 2009 is closest to: A. 0.08. B. 0.58. C. 1.58.: C. 1.
  4. Based on Exhibit 1 (REFER TO PAGE 268-269), which statement is most likely correct? A. Company A has below-average liquidity risk. B. Company B has above-average solvency risk. C. Company A has made one or more acquisitions.: C. Company A has made one or more acquisitions. (strong presence of goodwill in comparison to the other two companies)
  5. Based on Exhibit 1 (REFER TO PAGE 268-269) The quick ratio for Company A is closest to: A. 0.43. B. 0.57. C. 1.00.: A. 0.43.
  6. Based on Exhibit 1 (REFER TO PAGE 268-269), the financial leverage ratio for Company B is closest to: A. 0.55. B. 1.22. C. 2.22.: C. 2.22.
  7. Based on Exhibit 1 (REFER TO PAGE 268-269), which ratio indicates lower liquidity risk for Company A compared with Company B? A. Cash ratio B. Quick ratio C. Current ratio: A. Cash ratio

Study online at https://quizlet.com/_4n7lpd B. IFRS but may be classified as either operating or investing cash flows under US GAAP. C. US GAAP but may be classified as either operating or financing cash flows under IFRS.: C. US GAAP but may be classified as either operating or financing cash flows under IFRS.

  1. Cash flows from taxes on income must be separately disclosed under: A. IFRS only. B. US GAAP only. C. both IFRS and US GAAP.: C. both IFRS and US GAAP.
  2. Which of the following components of the cash flow statement may be prepared under the indirect method under both IFRS and US GAAP? A. Operating. B. Investing. C. Financing.: A. Operating.
  3. Which of the following is most likely to appear in the operating section of a cash flow statement under the indirect method? A. Net income. B. Cash paid to suppliers. C. Cash received from customers.: A. Net income. (all three would appear in the OCF under the direct method)
  4. A benefit of using the direct method rather than the indirect method when reporting operating cash flows is that the direct method: A. mirrors a forecasting approach. B. is easier and less costly. C. provides specific information on the sources of operating cash flows.: C. provides specific information on the sources of operating cash flows. (A & B are proponents of the indirect method)
  5. Mabel Corporation (MC) reported accounts receivable of $66 million at the end of its second fiscal quarter. MC had revenues of $72 million for its third fiscal quarter and reported accounts receivable of $55 million at the end of its third fiscal quarter. Based on this information, the amount of cash MC collected from customers during the third fiscal quarter is: A. $61 million. B. $72 million. C. $83 million.: C. $83 million.
  6. When computing net cash flow from operating activities using the indirect method, an addition to net income is most likely to occur when there is a: A. gain on the sale of an asset.

Study online at https://quizlet.com/_4n7lpd B. loss on the retirement of debt. C. decrease in a deferred tax liability.: B. loss on the retirement of debt.

  1. Red Road Company, a consulting company, reported total revenues of $ million, total expenses of $80 million, and net income of $20 million in the most recent year. If accounts receivable increased by $10 million, how much cash did the company receive from customers? A. $90 million. B. $100 million. C. $110 million.: A. $90 million.
  2. In 2014, a company using US GAAP made cash payments of $6 million for salaries, $2 million for interest expense, and $4 million for income taxes. Additional information for the company is provided in the table: 2013 2014 Revenue 42 37 Cost of goods sold 18 16 Inventory 36 40 Accounts receivable 22 19 Accounts payable 14 12 Based only on the information given, the company's operating cash flow for 2014 is closest to: A. $6 million. B. $10 million. C. $14 million.: A. $6 million.
  3. Green Glory Corp., a garden supply wholesaler, reported cost of goods sold for the year of $80 million. Total assets increased by $55 million, including an increase of $5 million in inventory. Total liabilities increased by $45 million, including an increase of $2 million in accounts payable. The cash paid by the company to its suppliers is most likely closest to: A. $73 million. B. $77 million. C. $83 million.: C. $83 million.
  4. Purple Fleur S.A., a retailer of floral products, reported cost of goods sold for the year of $75 million. Total assets increased by $55 million, but inventory declined by $6 million. Total liabilities increased by $45 million, and accounts payable increased by $2 million. The cash paid by the company to its suppliers is most likely closest to: A. $67 million. B. $79 million. C. $83 million.: A. $67 million.

Study online at https://quizlet.com/_4n7lpd Accum. dep. $40 million $46 million $6 million A. $1 million. B. $2 million. C. $3 million.: A. $1 million.

  1. REFER TO PAGES 318- A. Issuance of common stock of $42 million; dividends paid of $10 million. B. Issuance of common stock of $38 million; dividends paid of $10 million. C. Issuance of common stock of $42 million; dividends paid of $40 million.: A. Issuance of common stock of $42 million; dividends paid of $10 million.
  2. Based on the following information for Star Inc., what are the total net adjustments that the company would make to net income in order to derive operating cash flow? REFER TO PAGE 319 A. Add $2 million. B. Add $6 million. C. Subtract $6 million.: B. Add $6 million.
  3. The first step in cash flow statement analysis should be to: A. evaluate consistency of cash flows. B. determine operating cash flow drivers. C. identify the major sources and uses of cash.: C. identify the major sources and uses of cash.
  4. Which of the following would be valid conclusions from an analysis of the cash flow statement for Telefónica Group presented in Exhibit 3? REFER TO PAGES 282-283. A. The primary use of cash is financing activities. B. The primary source of cash is operating activities. C. Telefónica classifies interest received as an operating activity.: B. The prima- ry source of cash is operating activities.
  5. The following information is extracted from Sweetfall Incorporated's finan- cial statements. REFER TO PAGES 319-320. The amount of cash Sweetfall Inc. paid to suppliers is: A. $25,700. B. $26,702. C. $27,826.: A. $25,700.
  6. Which is an appropriate method of preparing a common-size cash flow statement? A. Show each item of revenue and expense as a percentage of net revenue. B. Show each line item on the cash flow statement as a percentage of net revenue. C. Show each line item on the cash flow statement as a percentage of total

Study online at https://quizlet.com/_4n7lpd cash outflows.: B. Show each line item on the cash flow statement as a percentage of net revenue.

  1. Which of the following is an appropriate method of computing free cash flow to the firm? A. Add operating cash flows to capital expenditures and deduct after-tax interest payments. B. Add operating cash flows to after-tax interest payments and deduct capital expenditures. C. Deduct both after-tax interest payments and capital expenditures from operating cash flows.: B. Add operating cash flows to after-tax interest payments and deduct capital expenditures.
  2. An analyst has calculated a ratio using as the numerator the sum of operating cash flow, interest, and taxes and as the denominator the amount of interest. What is this ratio, what does it measure, and what does it indicate? A. This ratio is an interest coverage ratio, measuring a company's ability to meet its interest obligations and indicating a company's solvency. B. This ratio is an effective tax ratio, measuring the amount of a company's operating cash flow used for taxes and indicating a company's efficiency in tax management. C. This ratio is an operating profitability ratio, measuring the operating cash flow generated accounting for taxes and interest and indicating a company's liquidity.: A. This ratio is an interest coverage ratio, measuring a company's ability to meet its interest obligations and indicating a company's solvency.
  3. An analyst gathered the following information from a company's 2010 financial statements (in $ millions): REFER TO PAGES 317- Based only on the information above, the company's 2010 statement of cash flows in the direct format would include amounts (in $ millions) for cash received from customers and cash paid to suppliers, respectively, that are closest to: cash received cash paid A 249.7 169. B 259.5 174. C 259.5 182.1: C 259.5 182.
  4. Comparison of a company's financial results to other peer companies for the same time period is called: A. technical analysis. B. time-series analysis. C. cross-sectional analysis.: C. cross-sectional analysis.

Study online at https://quizlet.com/_4n7lpd its debt-to-equity ratio from 0.35 to 0.50 from FY3 to FY5. (does not provide direct information about liquidity position)

  1. An analyst is evaluating the solvency and liquidity of Apex Manufacturing and has collected the following data: FY5 FY4 FY Total debt 2,000 1,900 1, Total equity 4,000 4,500 5, what would be the most reasonable explanation of the financial data? A. The decline in the company's equity results from a decline in the market value of this company's common shares. B. The €250 increase in the company's debt from FY3 to FY5 indicates that lenders are viewing the company as increasingly creditworthy. C. The decline in the company's equity indicates that the company may be incurring losses, paying dividends greater than income, and/or repurchasing shares.: C. The decline in the company's equity indicates that the company may be incurring losses, paying dividends greater than income, and/or repurchasing shares.
  2. An analyst observes a decrease in a company's inventory turnover. Which of the following would most likely explain this trend? A. The company installed a new inventory management system, allowing more efficient inventory management. B. Due to problems with obsolescent inventory last year, the company wrote off a large amount of its inventory at the beginning of the period. C. The company installed a new inventory management system but experi- enced some operational difficulties resulting in duplicate orders being placed with suppliers.: C. The company installed a new inventory management system but experienced some operational difficulties resulting in duplicate orders being placed with suppliers.
  3. Which of the following would best explain an increase in receivables turnover? A. The company adopted new credit policies last year and began offering credit to customers with weak credit histories. B. Due to problems with an error in its old credit scoring system, the company had accumulated a substantial amount of uncollectible accounts and wrote off a large amount of its receivables. C. To match the terms offered by its closest competitor, the company adopted new payment terms now requiring net payment within 30 days rather than 15 days, which had been its previous requirement.: B. Due to problems with an error in its old credit scoring system, the company had accumulated a substantial amount of uncollectible accounts and wrote off a large amount of its receivables.

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  1. Brown Corporation had average days of sales outstanding of 19 days in the most recent fiscal year. Brown wants to improve its credit policies and collection practices and decrease its collection period in the next fiscal year to match the industry average of 15 days. Credit sales in the most recent fiscal year were $300 million, and Brown expects credit sales to increase to $390 million in the next fiscal year. To achieve Brown's goal of decreasing the collection period, the change in the average accounts receivable balance that must occur is closest to: A. +$0.41 million. B. -$0.41 million. C. -$1.22 million.: A. +$0.41 million.
  2. An analyst observes the following data for two companies: REFER TO PAGES 392- Which of the following choices best describes reasonable conclusions that the analyst might make about the two companies' ability to pay their current and long-term obligations? A. Company A's current ratio of 4.0 indicates it is more liquid than Company B, whose current ratio is only 1.2, but Company B is more solvent, as indicated by its lower debt-to-equity ratio. B. Company A's current ratio of 0.25 indicates it is less liquid than Company B, whose current ratio is 0.83, and Company A is also less solvent, as indi- cated by a debt-to-equity ratio of 200 percent compared with Company B's debt-to-equity ratio of only 30 percent. C. Company A's current ratio of 4.0 indicates it is more liquid than Company B, whose current ratio is only 1.2, and Company A is also more solvent, as indicated by a debt-to-equity ratio of 200 percent compared with Company B's debt-to-equity ratio of only 30 percent.: A. Company A's current ratio of 4. indicates it is more liquid than Company B, whose current ratio is only 1.2, but Company B is more solvent, as indicated by its lower debt-to-equity ratio.
  3. REFER TO PAGES 393- The company's total assets at year-end FY9 were GBP 3,500 million. Which of the following choices best describes reasonable conclusions an analyst might make about the company's efficiency? A. Comparing FY14 with FY10, the company's efficiency improved, as indicat- ed by a total asset turnover ratio of 0.86 compared with 0.64. B. Comparing FY14 with FY10, the company's efficiency deteriorated, as indi- cated by its current ratio. C. Comparing FY14 with FY10, the company's efficiency deteriorated due to asset growth faster than turnover revenue growth.: C. Comparing FY14 with