Industry-Specific Ratios activity, valuation, remember, easily, really

kamara5

Do I have to memorize all these on top of the activity, liquidity, solvency, profitability, and valuation ratios?

I'm not easily overwhelmed - but Reading 35 on its own has successfully done it! It's not particularly hard, it's just a really dense chapter with a lot to try to remember!

giants2010

If you just want to pass the exam, then I think you can get away with not knowing them off by heart.

At most they will be worth 1 or 2 marks on the exam. I don't believe whether you pass or fail will come down to something so small and I personally wouldn't fret over it.

If you have the time to learn them all then by all means do it, but as you get closer to the exam you'll probably have to make a choice as to how you spend your remaining revision time. Much better to spend it on 'popular' stuff like Du Pont analysis I think.

cityboy

You'll need to know the ratios, but simple memorization won't get you far. Especially in accounting, expect questions like "How would your current ratio change if you used LIFO vs. FIFO as the inventory accounting method?"

CFAI likes to make sure you understand how the components of a ratio work and what will happen with changes in accounting policies.

yodacaia

Re read the ratios and visualize them. One way to memorize them is to differentiate the ratios that use Balance Sheet and those which use Income Statement elements. Usually return ratios have net profit or gross profit in the numerator etc. In this way visualizing the ratios in mind can make you memorize them.

Chuckrox

A light went off in my head one day when I stopped trying to just memorize the accounting ratios and instead intuitively learned what they meant and how they connected to one another. Much much easier after that point.

willsucceed

There are very few really stupid questions on the exam that test your on small details so I would know them. You don't want to miss out on easy points.

chandsingh

memorize them all now, cuz L2 ur going to see all those ratios again plus more.

My 2 cents

krause2

Ross.Pope Wrote:
-------------------------------------------------------
> I think what is needed to be learnt from ratio
> analysis is not only do you have to understand
> each ratio given, but also how each ratio
> interacts with each other. So, for example, if
> inventory increased, out of the quick ratio and
> current ratio which one would increase the most?
> or something that to effect.
>
> I believe CFAI want you to understand the dynamics
> between ratios as oppose to just being able to
> write the ratios in the exam.


exactly, know them and also be able to understand how different situations can affect them. Mock exams will help you get that

fishmarket

I think what is needed to be learnt from ratio analysis is not only do you have to understand each ratio given, but also how each ratio interacts with each other. So, for example, if inventory increased, out of the quick ratio and current ratio which one would increase the most? or something that to effect.

I believe CFAI want you to understand the dynamics between ratios as oppose to just being able to write the ratios in the exam.

liquidity

if the LOS says you need em...then u need em