CFIN
6th Edition
ISBN: 9780357144039
Author: BESLEY
Publisher: CENGAGE L
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Question
Chapter 12, Problem 10PROB
Summary Introduction
Degree of operating leverage (DOL):
It is the ratio of gross profit to net operating income.
Calculate the degree of operating leverage as follows:
Degree of financial leverage (DFL):
It is the ratio of net operating income to earnings before tax.
Calculate the degree of financial leverage as follows:
Degree of total leverage (DTL):
It is the ratio of gross profit to earnings before tax.
Calculate the degree of total leverage as follows:
By using the income statement calculate the degree of operating leverage, degree of financial leverage and degree of total leverage.
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