# Degree of Financial Leverage

Written by Jerry Ratzlaff on . Posted in Manufacturing Engineering

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

 $$\large{ DFL = \frac{ EPS_{pc} }{ EBIT_{pc} } }$$

### Where:

$$\large{ DFL }$$ = degree of financial leverage

$$\large{ EBIT_{pc} }$$ = percent change in EBIT

$$\large{ EPS_{pc} }$$ = percent change in EPS

$$\large{ EBIT }$$ = earnings before interest and taxes (operating profit)

$$\large{ EPS }$$ = earnings per share