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AICPA CPA-Business Exam - Topic 2 Question 59 Discussion

Actual exam question for AICPA's CPA-Business exam
Question #: 59
Topic #: 2
[All CPA-Business Questions]

When a firm finances each asset with a financial instrument of the same approximate maturity as the life of the asset, it is applying:

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Suggested Answer: A

Choice 'a' is correct. Appropriate working capital management matches the maturity life of each asset with the length of the financial instrument used to finance that asset.

Choice 'b' is incorrect. Return maximization seeks to obtain the optimal return rate by asset utilization. It is not necessarily related to the maturity of the asset.

Choice 'c' is incorrect. Financial leverage is the amount of debt used to finance an asset. Higher leverage equals more debt. It is unrelated to the maturity life of an asset.

Choice 'd' is incorrect. Operating leverage is the degree that fixed costs are used in the production process. Operating leverage is unrelated to the methods used to finance assets.


by Kate at Oct 11, 2022, 07:05 PM

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Ula
8 days ago
Just to clarify, it's A - working capital management.
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Jill
14 days ago
Wait, are we sure it's not operating leverage?
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Jonelle
20 days ago
Totally agree, it's all about matching maturities.
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Aileen
25 days ago
I thought it was more about financial leverage.
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Detra
1 month ago
That's definitely working capital management!
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Edda
1 month ago
Return maximization sounds familiar, but I can't recall if it specifically involves matching maturities.
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Edelmira
1 month ago
I feel like operating leverage is more about fixed costs and revenue, so that doesn't seem right.
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Verda
1 month ago
I remember a practice question that talked about matching the maturity of assets and liabilities. Could it be financial leverage?
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Emiko
1 month ago
I think this might be related to working capital management, but I'm not entirely sure.
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Fannie
1 month ago
This seems like a straightforward question about Scrum practices. I'll carefully read through the options and think about what the Scrum Guide says about handling incomplete work at the end of a Sprint.
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Therese
2 months ago
This seems like a straightforward Scrum question. I'll carefully read through the options and think about the Scrum framework to determine the best answer.
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