Degree of Financial Leverage Calculator

✖Earnings Before Interest and Taxes is a measure of a firm's profit that includes all expenses except interest and income tax expenses.ⓘ Earnings Before Interest and Taxes [EBIT]			+10% -10%
✖Interest is the charge for the privilege of borrowing money, typically expressed as an annual percentage rate.ⓘ Interest [I]			+10% -10%

✖The Degree of Financial Leverage 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]

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Formula

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Degree of Financial Leverage

Formula

`"DFL" = "EBIT"/("EBIT"-"I")`

Example

`"1.000016"="450000"/("450000"-"7")`

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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 3 Variables

Variables Used

Degree of Financial Leverage - The Degree of Financial Leverage is a metric that measures the sensitivity of a company’s operating income due to changes in its capital structure.
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 ≈ 1.000016 <-- Degree of Financial Leverage

(Calculation completed in 00.004 seconds)

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Created by Team Softusvista

Softusvista Office (Pune), India

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Verified by Himanshi Sharma

Bhilai Institute of Technology (BIT), Raipur

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< 4 Leverage Ratios Calculators

Degree of Financial Leverage

Go Degree of Financial Leverage = Earnings Before Interest and Taxes/(Earnings Before Interest and Taxes-Interest)

Degree of Combined Leverage

Go Degree of Combined Leverage = Degree of Operating Leverage*Degree of Financial Leverage

Degree of Operating Leverage

Go Degree of Operating Leverage = % Change in EBIT/% Change in Sales

Financial Leverage

Go Financial Leverage = Total Debt/Total Shareholders' Equity

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, 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 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) & 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 & 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) & Interest (I). With our tool, you need to enter the respective value for Earnings Before Interest and Taxes & 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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