What would be the degree of financial leverage for Under A Cloud Skydiving School if the company will have earnings before interest and taxes of $750,000 which would be a 15% increase? The firm had EPS of $1.25 but, with the increased earnings, anticipates paying $1.37.
A).80
B)1.08
C)2.01
D)1.25

Question

Quizplus · Accepted Answer

$$\frac { \% \Delta \mathrm { EPS } } { \% \Delta \mathrm { EBIT } } = \frac { ( 1.37 - 1.25 ) } { 1.25 } / 0.15 = 0.12 / 0.15 = 0.80$$

What Would Be the Degree of Financial Leverage for Under