The Leader in CFA® Review
  1. CFA Exam: Dec. 2019 Level I
  2. Study Session 11. Corporate Finance: Leverage and Working Capital Management
  3. Reading 36. Measures of Leverage

Learning Outcome Statements

Print reading Add my private note Mark as complete Print basic questions

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.