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Degree of Financial Leverage Formula

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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. Check FAQs

DFL = \frac{EBIT}{EBIT - I}

DFL - Degree of Financial Leverage?EBIT - Earnings Before Interest and Taxes?I - Interest?

Degree of Financial Leverage Example

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Here is how the Degree of Financial Leverage equation looks like with Values.

Here is how the Degree of Financial Leverage equation looks like with Units.

Here is how the Degree of Financial Leverage equation looks like.

1 = \frac{450000}{450000 - 7}

1 = \frac{450000}{450000 - 7}

1 = \frac{450000}{450000 - 7}

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Degree of Financial Leverage Solution

Follow our step by step solution on how to calculate Degree of Financial Leverage?

FIRST Step Consider the formula

DFL = \frac{EBIT}{EBIT - I}

Next Step Substitute values of Variables

∴

DFL = \frac{450000}{450000 - 7}

Next Step Prepare to Evaluate

∴

DFL = \frac{450000}{450000 - 7}

Next Step Evaluate

∴

DFL = 1.00001555579753

LAST Step Rounding Answer

∴

DFL = 1

Degree of Financial Leverage Formula Elements

Variables

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.

Symbol: DFL

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Degree of Financial Leverage

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.

Symbol: EBIT

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Earnings Before Interest and Taxes

Interest

Interest is the charge for the privilege of borrowing money, typically expressed as an annual percentage rate.

Symbol: I

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Interest

Other formulas in Leverage Ratios category

Go Degree of Operating Leverage

DOL = \frac{%ΔEBIT}{%ΔSales}

Go Degree of Combined Leverage

DCL = DOL \cdot DFL

Go Financial Leverage

FL = \frac{TD}{TSE}

How to Evaluate Degree of Financial Leverage?

Degree of Financial Leverage evaluator uses Degree of Financial Leverage = Earnings Before Interest and Taxes/(Earnings Before Interest and Taxes-Interest) to evaluate 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 evaluate Degree of Financial Leverage using this online evaluator? To use this online evaluator for Degree of Financial Leverage, enter Earnings Before Interest and Taxes (EBIT) & Interest (I) and hit the calculate button.

FAQs on Degree of Financial Leverage

What is the formula to find Degree of Financial Leverage?

The formula of Degree of Financial Leverage is expressed as Degree of Financial Leverage = Earnings Before Interest and Taxes/(Earnings Before Interest and Taxes-Interest). Here is an example- 1.000016 = 450000/(450000-7).

How to calculate Degree of Financial Leverage?

With Earnings Before Interest and Taxes (EBIT) & Interest (I) we can find Degree of Financial Leverage using the formula - Degree of Financial Leverage = Earnings Before Interest and Taxes/(Earnings Before Interest and Taxes-Interest).

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Degree of Financial Leverage Formula

Degree of Financial Leverage Example

Degree of Financial Leverage Solution

Degree of Financial Leverage Formula Elements

Other formulas in Leverage Ratios category

How to Evaluate Degree of Financial Leverage?

FAQs on Degree of Financial Leverage

Variable Name