testing advice testing, question, everyone, understand

Jupiter

Been through a few of these, and best advice I can give for L1 is to make sure you understand the question, and what is being asked.
An example being a company collects cash for 10M of A/R; what effect does this have on the current ratio?
A. Increase
B. No change
C. Decrease

Easy to cruise through an easy question and miss this. There will be lots on the exam.

Good luck to everyone.

Bluetick1010

This is how CFAI will make easy questions into easily missed questions.

jim8z3

Man I hope I can sleep tonight. This thread took a while to make sense of in my current dreary state.

Jolyn

the cash ratio is the one increasing

cash + marketable securities / CL

invic

Doesn't collecting cash from A/R account means increasing cash in cash account ?
thats makes current ratio unchanged and increase in quick ratio!
Gee, hope i am right, it sucks if i get this one wring at this point !

mnieman

bez Wrote:
-------------------------------------------------------
> Doesn't collecting cash from A/R account means
> increasing cash in cash account ?
> thats makes current ratio unchanged and increase
> in quick ratio!
> Gee, hope i am right, it sucks if i get this one
> wring at this point !


You are right that the current ratio remains unchanged, but the quick ratio also remains unchanged since receivables are also included in the quick ratio. You are just transferring the accounts receivable money (a current asset) to cash (another current asset).



Edited 1 time(s). Last edit at Thursday, December 2, 2010 at 10:56PM by CFAcountry.

agulani

You didnt provide the answer.

dotamasta

@ski - you are supposed to answer the question....but B careful...can B tricky