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Degree of Financial Leverage Solution

STEP 0: Pre-Calculation Summary
Formula Used
degree_of_financial_leverage = Earnings Before Interest and Taxes/(Earnings Before Interest and Taxes-Interest)
DFL = EBIT/(EBIT-I)
This formula uses 2 Variables
Variables Used
Earnings Before Interest and Taxes- Earnings Before Interest and Taxes is a measure of a firm's profit that includes all expenses except interest and income tax expenses.
Interest- Interest is the charge for the privilege of borrowing money, typically expressed as an annual percentage rate.
STEP 1: Convert Input(s) to Base Unit
Earnings Before Interest and Taxes: 450000 --> No Conversion Required
Interest: 7 --> No Conversion Required
STEP 2: Evaluate Formula
Substituting Input Values in Formula
DFL = EBIT/(EBIT-I) --> 450000/(450000-7)
Evaluating ... ...
DFL = 1.00001555579753
STEP 3: Convert Result to Output's Unit
1.00001555579753 --> No Conversion Required
FINAL ANSWER
1.00001555579753 <-- Degree of Financial Leverage (DFL)
(Calculation completed in 00.047 seconds)

2 Other formulas that you can solve using the same Inputs

Return on capital employed
return_on_capital_employed = (Earnings Before Interest and Taxes/(Total Assets-Current Liabilities))*100 Go
Operating Cash Flow
operating_cash_flow = Earnings Before Interest and Taxes+Depreciation-Taxes Go

Degree of Financial Leverage Formula

degree_of_financial_leverage = Earnings Before Interest and Taxes/(Earnings Before Interest and Taxes-Interest)
DFL = EBIT/(EBIT-I)

What is Degree of Financial Leverage?

The degree of financial leverage (DFL) measures the percentage change in EPS for a unit change in operating income, also known as earnings before interest and taxes (EBIT). This ratio indicates that the higher the degree of financial leverage, the more volatile earnings will be. Since interest is usually a fixed expense, leverage magnifies returns and EPS. This is good when operating income is rising, but it can be a problem when operating income is under pressure. The use of financial leverage varies greatly by industry and by the business sector.

How to Calculate Degree of Financial Leverage?

Degree of Financial Leverage calculator uses degree_of_financial_leverage = Earnings Before Interest and Taxes/(Earnings Before Interest and Taxes-Interest) to calculate the Degree of Financial Leverage (DFL), The degree of financial leverage (DFL) is a metric that measures the sensitivity of a company’s operating income due to changes in its capital structure. Degree of Financial Leverage (DFL) and is denoted by DFL symbol.

How to calculate Degree of Financial Leverage using this online calculator? To use this online calculator for Degree of Financial Leverage, enter Earnings Before Interest and Taxes (EBIT) and Interest (I) and hit the calculate button. Here is how the Degree of Financial Leverage calculation can be explained with given input values -> 1.000016 = 450000/(450000-7).

FAQ

What is Degree of Financial Leverage?
The degree of financial leverage (DFL) is a metric that measures the sensitivity of a company’s operating income due to changes in its capital structure and is represented as DFL = EBIT/(EBIT-I) or degree_of_financial_leverage = Earnings Before Interest and Taxes/(Earnings Before Interest and Taxes-Interest). Earnings Before Interest and Taxes is a measure of a firm's profit that includes all expenses except interest and income tax expenses and Interest is the charge for the privilege of borrowing money, typically expressed as an annual percentage rate.
How to calculate Degree of Financial Leverage?
The degree of financial leverage (DFL) is a metric that measures the sensitivity of a company’s operating income due to changes in its capital structure is calculated using degree_of_financial_leverage = Earnings Before Interest and Taxes/(Earnings Before Interest and Taxes-Interest). To calculate Degree of Financial Leverage, you need Earnings Before Interest and Taxes (EBIT) and Interest (I). With our tool, you need to enter the respective value for Earnings Before Interest and Taxes and Interest and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.
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