P/E and Earning Yields ratios on CMA Part 2 exam

Attention all CMA Part 2 candidates:

According to information recently received from the ICMA (the entity that administers and grades the CMA exams), the Price/Earnings and Earnings Yield ratios should be calculated using Basic EPS, not Diluted EPS. The Price/Earnings Ratio should be calculated as Market Price Per Common Share / Basic Earnings Per Share. The Earnings Yield ratio is Basic Earnings Per Share / Market Price Per Common Share.

The current HOCK textbook specifies Diluted EPS for both ratios, and that will be changed to Basic EPS in the next update. Answers to questions in the October ExamSuccess update already reflect the use of Basic EPS instead of Diluted EPS. In addition, the HOCK Classroom videos and audios include the revised calculation of the ratios.

4 Comments

  1. Nayif Mohammad Akour on January 21, 2014 at 4:01 am

    do we have to use Basic or diluted on (may & June) exam ?
    please adivse .



  2. HOCK international on January 21, 2014 at 9:06 am

    Basic EPS should be used.



  3. Kenneth Avrell Auman on June 20, 2014 at 8:08 am

    Hello, does this also mean that for Price/EBITDA ratio, Basic EBITDA per share is used instead of Diluted EBITDA per share?
    Thanks!



  4. HOCK international on June 20, 2014 at 10:34 am

    Hi Kenneth, the ICMA has told us to use the number of shares used for Basic.



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