Topic: CFA Exam

Degree of Total Leverage

Using the formulas for Degree of Operating Leverage (DOL) and Degree of Financial Leverage (DFL), we can calculate the degree of total leverage (DTL) for the firm as follows: In the above formula, you can observe that if there are no fixed operating costs and fixed...

Degree of Financial Leverage

Financial leverage arises when a firm has fixed financing costs in its income stream. The presence of financial leverage magnifies the effects of changes in sales to the firm’s net earnings. Sources of financial leverage are primarily debt and preferred stock. The...

Put Option Payoff

A put option is the right, but not the obligation, to sell an asset at a prespecified price on, or before, a prespecified date in the future. Long Put The payoff diagram of a put option looks like a mirror image of the call option (along the Y axis). Consider a put...

Global Depositary Receipts

Global Depositary Receipts (GDRs) give issuers exposure to the global markets outside their home market. Depositary receipts are negotiable certificates issued by a bank to represent the underlying shares of stock. The underlying shares are held in trust at a foreign...

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