CMA Community / Study Group

1.  CMA Pop Quiz - Q202

Posted 10-20-2017 01:57 PM
A financial analyst with Mineral Inc. calculated the company's degree of financial leverage as 1.5. If net income before interest increases by 5%, earnings to shareholders will increase by

a. 1.50%
b. 3.33%
c. 5.00%
d. 7.50%

CMA Exam Part 2

Morgan Del Rio
Marketing and Social Media Manager

2.  RE: CMA Pop Quiz - Q202

Posted 10-24-2017 07:40 AM
the answer is d. 7.50 (1.5x5%)
DFL measures how an increase in EBIT will affect earnings to shareholders.therefor a 5% increase in EBIT will cause a 7.5 %increase in earnings to shareholders.

Sahna Salimu