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  2. CFA Certification
  3. CFA-Level-I Exam
  4. CFA.CFA-Level-I.v2024-01-19.q367 Dumps
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Question 301

As an analyst, you are concerned about whether Arcadian Manufacturing Co. can generate a stream of inflows sufficient to pay interest expense. In the last three quarters, Arcadian's operating cash flows have been decreasing, but its operating profits have been increasing. Which one of the following ratios is the best one to use in this situation?

Correct Answer: C
The cash flow coverage ratio (operating cash flows before interest and tax payments/interest paid) discloses whether operating cash flows will be sufficient to pay interest on debt. Since the operating cash flows are decreasing, this ratio provides a more conservative result and is more appropriate to use than accrual based operating profit.
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Question 302

Consider the following statements about t and z-tests:
I). The degrees of freedom in a t-distribution depend on sample size, and generally the degrees of freedom are defined as n-1.
II). As sample size increases a t-graph begins to resemble a z-graph.
III). For infinity degrees of freedom the critical values for a z-distribution can also be found on a t-table in the row that has infinity as its degrees of freedom.
Which statement(s) is/are TRUE?

Correct Answer: A
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Question 303

Which of the following statements related to the Statement of Cash Flows is false?

Correct Answer: A
This statement is false since treasury stock involves a company's own shares and thus would be classified as a financing activity.
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Question 304

Greenbelt Processors had a beginning inventory of 798 units valued at a cost of 34,895. It purchased
4 ,474 units of new inventory worth 195,402 during the year. A year-end audit revealed that it had 853 units on hand.
If Greenbelt uses the weighted average cost method, what was its COGS for the year?

Correct Answer: C
Under average cost method, we price all units including those in beginning inventory and purchased during the year at an average price.
Average price = [34,895 + 195,402] / [798 + 4,474] = 43.683 Ending inventory = 853 x 43.683 = 37,262
COGS = BI + Purchases - EI = 34,895 + 195,402 - 37,262 = 193,035.
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Question 305

Which of the following is the best explanation for diseconomies of scale?

Correct Answer: A
Diseconomies of scale occur when long-run average cost is rising. A good explanation for this is coordination problems resulting from the difficulty of managing large organizations. Answer C
(diminishing returns) is a short-run problem that comes from the fact that all inputs cannot be adjusted, and is thus unrelated to diseconomies of scale.
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