Degree of financial leverage, abbreviated as DFL, is used to measure the sensitivity of a corporations earnings per share to its equity capital.
degree of financial leverage Formula |
| \( DFL \;=\; \dfrac{ EPS_{pc} }{ EBIT_{pc} } \) |
| Symbol |
| \( DFL \) = degree of financial leverage |
| \( EPS_{pc} \) = percent change in EPS |
| \( EBIT_{pc} \) = percent change in EBIT |
| \( EPS \) = earnings per share |
| \( EBIT \) = earnings before interest and taxes (operating profit) |
