2025 CFA Level I Exam: CFA Study Preparation

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Which of the following ratios evaluates the effectiveness with which a company uses its assets?

Receivables Turnover : Interest Coverage

A. Yes : Yes
B. Yes : No
C. No : No

User	Comment
mtcfa	Somewhat tricky. Rec turnover involves an asset, but does it really have anything to do with how a firm is USING its assets, like PPE?
gth763s	Receivable turnover measures internal liquidity.
thud	I agree with mtcfa.
RCapistrano	"Somewhat tricky. Rec turnover involves an asset, but does it really have anything to do with how a firm is USING its assets, like PPE?" I do agree with this statement. How I've had to think about this is the following: When deriving the CFO (cash flow from operations) using the indirect method, an increase in A/R(accounts receivable) is subtracted from Net Income. Uses of assets are always subtracted; therefore, this decrease is a form of "uses of assets." I hope this helps and that it's accurate. If I'm viewing this incorrectly, I would appreciate any input. Thanks.
reganbaha	It measures how quickly a firm gets the cash. cash is an asset.
johntan1979	The last time I checked, receivables is an asset. Don't think too much or too hard. Don't make the CFA exam harder than it already is.
ascruggs92	mtcfa, selling inventory is typically the main source of revenue generation. Considering that revenue generation is the main object of all companies, long term assets such as PP&E are investments made to create revenue generation, meaning inventory turnover has everything to do with use of assets

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Learning Outcome Statements

calculate and interpret free cash flow to the firm, free cash flow to equity, and performance and coverage cash flow ratios

CFA® 2025 Level I Curriculum, Volume 2, Module 5.