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15-14-1
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 Fields
The 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
k
Example
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
EBIT – ITR
DFL =
EBIT
DFL – 1
EIT =
DFL × ITR
DFL
ITR =
EIT × (DFL – 1)
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