Degree of Financial Leverage Calculator
Calculate two-period degree of financial leverage from percentage changes in EPS and EBIT.
Enter EPS and EBIT for the same two periods. Period-0 EPS and EBIT must be nonzero. This is a ratio calculation and sets no normative threshold.
Manual inputs stay in this browser. No external data is fetched.
Sources: ACCA study resources: financial leverage concepts
Result
A QUICK WALKTHROUGH
How to use this tool
- Enter EPS and EBIT for the same two periods. Period-0 EPS and EBIT must be nonzero. This is a ratio calculation and sets no normative threshold.
- DFL = (EPS₁ − EPS₀) / EPS₀ ÷ ((EBIT₁ − EBIT₀) / EBIT₀).
- Manual inputs stay in this browser. No external data is fetched.
Formula
DFL = (EPS₁ − EPS₀) / EPS₀ ÷ ((EBIT₁ − EBIT₀) / EBIT₀).
Assumptions and limits
Enter EPS and EBIT for the same two periods. Period-0 EPS and EBIT must be nonzero. This is a ratio calculation and sets no normative threshold.
Sources
ACCA study resources: financial leverage concepts
GOOD TO KNOW
Common questions
What does a DFL of 2 mean?
Under the two-period inputs, EPS changed by about twice the percentage change in EBIT. It is a calculated ratio, not a forecast.
Why can the result be undefined?
Period 0 EPS or EBIT cannot be zero, and the percentage change in EBIT must also be nonzero because it is the denominator.
Does DFL measure total business risk?
No. It describes the observed relationship between EPS and EBIT changes for the entered periods; it does not include operating risk or predict future results.