If EBIT equals $140,000 and interest equals $21,000, with a tax rate of 31%, what is the degree of financial leverage?
A) 6.67x
B) 5.67
C) 3.91x
D) 1.18x

Name: If EBIT equals $140,000 and interest equals $21,000, with a tax rate of 31%, what is the degree of financial leverage? A) 6.67x B) 5.67 C) 3.91x D) 1.18x
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Quizplus · Accepted Answer

The degree of financial leverage (DFL) is calculated as EBIT / (EBIT - Interest). Here, DFL = $140,000 / ($140,000 - $21,000) = $140,000 / $119,000 = 1.18x.

If EBIT Equals $140,000 and Interest Equals $21,000, with a Tax