Question

Sally corporation wants to know the degree of financial leverage. the percentage change in earnings before interest and tax is 8% and the percentage of change in earnings per share is 16%. what is the degree of financial leverage for the company?

Answer 1

Answer:

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.