Asked by
Patricia Wyrzykowski
on Dec 01, 2024Verified
A company has EBIT of $2,400,000 and interest expense of $300,000. What is its DFL?
A) 8.0
B) 0.125
C) 1.1429
D) Not enough information to determine the answer.
DFL
Usually refers to Degree of Financial Leverage, a ratio that measures the sensitivity of a company's earnings per share to fluctuations in its operating income, as affected by changes in its capital structure.
EBIT
Earnings Before Interest and Taxes, an indicator of a company's profitability excluding interest and income tax expenses.
Interest Expense
The cost incurred by an entity for borrowed funds, typically paid to lenders as interest on loans.
- Analyze and calculate financial metrics and leverages including Earnings Per Share, Degree of Financial Leverage, and Return on Equity.
Verified Answer
KG
Learning Objectives
- Analyze and calculate financial metrics and leverages including Earnings Per Share, Degree of Financial Leverage, and Return on Equity.