A company experiences a 60 percent change in net income for every 10 percent change in operating profit. What is this company's degree of financial leverage?
A) 0.166
B) 6.0
C) 16.6
D) 60.0

Question

Quizplus · Accepted Answer

The degree of financial leverage (DFL) is calculated as the percentage change in net income divided by the percentage change in operating profit. Here, it's 60% / 10% = 6.0.

A Company Experiences a 60 Percent Change in Net Income