Financial Leverage
15-14 Financial Leverage
Financial Leverage lets you calculate the degree of change in net earnings arising from a change in interest paid.
Financial Leverage FieldsThe following fields appear on the Financial Leverage calculation page.
Field | Description |
EBIT | Earnings before interest and taxes |
INT | Interest to be paid to bondholders |
DFL | Degree of financial leverage |
kExample
Calculate the financial leverage ([DFL]) for a company that earns $400,000 before interest and taxes ([EBIT]), $80,000 of which is paid to bondholders ([INT]).
•You can also calculate earnings before interest and taxes ([EBIT]) or interest to be paid to bondholders ([INT]) by inputting the other two values and tapping the button for the result you want.
Calculation Formulas
DFL = | EBIT |
EBIT – ITR |
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