Chartered Financial Analyst Level 2
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60 An analyst gathers the following information about a take-or-pay contract disclosed by a company in the notes to its financial statements:
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Future purchase obligation payments: €10,000,000
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Present value of future purchase obligation payments: €8,000,000
To properly reflect the company's leverage, using constructive capitalization, the analyst should adjust the company's reported financial statements by:
60 An analyst gathers the following information about a take-or-pay contract disclosed by a company in the notes to its financial statements:
-
Future purchase obligation payments: €10,000,000
-
Present value of future purchase obligation payments: €8,000,000
To properly reflect the company's leverage, using constructive capitalization, the analyst should adjust the company's reported financial statements by:
Exam-Like
A
adding €8,000,000 to the assets and adding €8,000,000 to the liabilities.
B
adding €10,000,000 to the assets and adding €10,000,000 to the liabilities.
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