Free Access CFA.CFA-Level-I.v2022-03-06.q736 Practice Test (Page 60)

Which statement is true?

A.A portfolio with a Sharpe ratio of 0.8 is 2 times better than a portfolio with a Sharpe ratio of 0.4.

B.The Treynor ratio can be used to rank portfolios.

C.A portfolio with an M-square of 1 matches the performance of the market.

Which of the following statements is false?

A.The optimal capital structure is that mixed of debt and equity (common and preferred stock) that maximizes the firm value.

B.The optimal capital structure is where a value-maximizing firm wants to be, a long run objective.

C.A value-maximizing firm will never have a capital structure different from the optimal capital structure.

In order to stimulate aggregate demand, the government is considering reducing taxes. Keyesian economists would suggest that the government should:

A.reduce taxes of wealthy people first because their marginal tax rate is very high.

B.reduce taxes of middle-class people first because they are the majority.

C.the class of people affected by the tax cut policy is not a concern.

Which of the following statements is not true in regard to the LIFO inventory cost flow assumption?

A.The LIFO cost flow assumption does not normally reflect the usual physical flow of inventory units.

B.For balance sheet purposes, the cost of inventory will approximate the current replacement cost under the LIFO assumption.

C.If a company uses LIFO for tax purposes, it must also use LIFO for external financial reporting purposes.

A long-term asset is different from inventory primarily because:

A.A long-term asset is used in operations and not for resale.

B.A long-term asset is long-term in nature.

C.A long-term asset has physical substance.

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