financial leverage, operating leverage

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DOL

% change in EBIT/% change in sales

DFL

% change in EPS / % change in EBIT

DCL

% change in EPS / % change in sales

operating leverage

is defined as the degree to which a firm uses fixed operating costs, as opposed to variable operating costs

financial leverage

is defined as the degree to which a firm's use of debt to finance the firm magnifies the effects of a given percentage change in earnings before interest and taxes (EBIT) on the percentage change in its earnings per share (EPS).


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