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TYPES OF LEVERAGE
Degree of Financial Leverage (DFL)
It is the effect on earnings per share (EPS) due to
changes in EBIT . To measure the rate of change, the
degree of financial leverage (DFL) is used to determine
the effect on EPS due to the occurrence of any change in
EBIT.
DFL = EBIT
EBT
Degree Of Combined Leverage (DCL)
The degree of combined leverage, also known as the
degree of total leverage refers to the percentage change
in a firm’s earnings per share that results from a given
percentage change in the firm’s sales. DCL of a firm at a
particular level of sales is equal to the percentage change
in earnings per share resulting from the percentage
change in sales.
DCL will see the effect on EPS due to changes in the
level of sales .
DCL = DOL X CFL
