Operating leverage and degree of financial leverage

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Degree of operating leverage (DOL)

%∆EBIT/%∆Sales or (sales-cost of sales)/EBIT

DFL

%∆EBT/%∆EBIT

Degree of combined leverage (DCL)

DOL x DFL

DOL

business risk

DFL

financial risk

DOL > 1.0

high level of fixed cost, high business risk


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