A firm's EPS increased 27% on a 12% increase in sales. At the same time its EBIT increased 8% what is the firm's DFL?
A)1.50
B)3.36
C)1.34
D)0.67

Question

Quizplus · Accepted Answer

The Degree of Financial Leverage (DFL) is calculated as the percentage change in EPS divided by the percentage change in EBIT. Given that EPS increased by 27% and EBIT increased by 8%, DFL = 27% / 8% = 3.375, which rounds to 3.36, making option B correct.

A Firm's EPS Increased 27% on a 12% Increase in Sales