Asked by Guillermo Orizaba on May 20, 2024
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The Degree of Financial Leverage(DFL)quantifies the effect of leverage by relating relative changes in EBIT to relative changes in EPS.
Financial Leverage
Utilizing borrowed money to amplify the potential gains from an investment, but also elevating the risk of incurring losses.
DFL
Degree of Financial Leverage; a ratio that measures the sensitivity of a company's earnings per share to fluctuations in its operating income, based on its capital structure.
EBIT
EBIT stands for Earnings Before Interest and Taxes, a measure of a firm’s profitability that excludes interest and income tax expenses.
- Acquire knowledge regarding the Degree of Financial Leverage (DFL) and its importance.
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Learning Objectives
- Acquire knowledge regarding the Degree of Financial Leverage (DFL) and its importance.
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