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Degree of Financial Leverage Calculator

Enter the % change in EPS and the % change in EBIT to get the DFL.

How to use

  1. Enter your values in the fields above.
  2. Press Calculate to see your result instantly.
  3. Use the Share button to copy a link to your result.

About this calculator

Degree of financial leverage (DFL) measures how much a percentage change in operating profit (EBIT) is amplified into a larger percentage change in earnings per share, because of fixed interest expense: DFL = %ΔEPS ÷ %ΔEBIT. At a single point in time it can equivalently be computed as EBIT ÷ (EBIT − Interest Expense).

Because interest payments are fixed regardless of how much operating profit swings, a heavily indebted company has a higher DFL — a 10% jump in EBIT might produce a 20% or 30% jump in EPS. CFOs and equity analysts use DFL to judge how much debt is magnifying earnings volatility, which matters most when deciding how much additional leverage a company can safely take on.

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