- CFA Exams
- Dec. 2020 Level 1
- Study Session 11. Corporate Finance II
- Reading 34. Measures of Leverage
Reading 34. Measures of Leverage
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Learning Outcome Statements
| Reading 34. Measures of Leverage | |
|---|---|
| 1. Business Risk and Operating Leverage a. define and explain leverage, business risk, sales risk, operating risk, and financial risk and classify a risk; b. calculate and interpret the degree of operating leverage, the degree of financial leverage, and the degree of total leverage; c. analyze the effect of financial leverage on a company's net income and return on equity; | |
| 2. Financial Risk and Financial Leverage a. define and explain leverage, business risk, sales risk, operating risk, and financial risk and classify a risk; b. calculate and interpret the degree of operating leverage, the degree of financial leverage, and the degree of total leverage; c. analyze the effect of financial leverage on a company's net income and return on equity; | |
| 3. Total Leverage and Breakeven Points d. calculate the breakeven quantity of sales and determine the company's net income at various sales levels; e. calculate and interpret the operating breakeven quantity of sales. | |
| 4. The Risks of Creditors and Owners d. calculate the breakeven quantity of sales and determine the company's net income at various sales levels; e. calculate and interpret the operating breakeven quantity of sales. |