Page 47 - FINAL CFA SLIDES DECEMBER 2018 DAY 11

Session Unit 11:

37. Measures of Leverage

Example: Degree of operating leverage., 68: Consider the costs for the projects presented in the

following table. Assuming that 100,000 units are produced for each firm, calculate the DOL for
Atom Company and Beta Company.

tanties

The results indicate that if Beta Company has a 10% increase in sales, its EBIT will increase by 2.50 × 10%

= 25%, while for Atom Company, the increase in EBIT will be 1.67 × 10% = 16.7%.
It is important to note that the degree of operating leverage for a company depends on the level of

sales. For example, if Atom Company sells 300,000 units, the DOL is decreased

DOL is highest at low levels of
sales and declines at higher

levels of sales.