CMA Study Group

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  • 1.  Need Clarifications

    Posted 08-26-2017 06:16 AM
    Hello Everyone,

    I was preparing for Part 2 of CMA exams, and I have 3 queries where I haven't seen unanimous answers;

    1.When we calculate PE ratio, dowe use Basic EPS or Diluted EPS in denominator? (Hock use Basic Gleim use Diluted)
    2.Salvage value is considered or ignored when for depreciation tax shield in NPV problems? (Gleim ignores, Older version of Gleim consider)
    3.For calculating Accounting rate of Return, do we use Avg. Investment or Initial Cost in denominator? (Gleim and Hock use Avg investment, Older version of Gleim use Initial cost)

    Will be thankful, if someone replies..

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    Zakwan Abu Mohammed Sada
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  • 2.  RE: Need Clarifications

    Posted 08-28-2017 12:57 PM
    Hello,

    Here are the answers to your questions. Please let me know if you need anything else. Thank you!
    1. The PE ratio uses EPS in the denominator. Candidates are responsible for knowing both the Basic EPS and the Diluted EPS. The exam question will indicate which one should be used in the calculation of the PE ratio.
    2. Ignore the salvage value.
    3. The Accounting Rate of Return is not included in the current CMA Learning Outcome Statements, and would not be included in the exam questions.


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    Morgan Greenleaf
    Marketing and Social Media Manager
    IMA
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    Original Message