Degree of Financial Leverage Calculator

How it is calculated

You supply two percentage changes for the same period and the tool divides them: DFL = %ΔEPS ÷ %ΔEBIT. Each is the change from one period to the next, for example (new − old) ÷ old × 100, entered as a plain number (18 for 18%). The result is a multiplier shown to two decimals: a DFL of 1.5 means every 1% move in operating profit moves earnings per share by about 1.5%. The tool does not read EBIT or interest directly, so you work out both percentages first. If the EBIT change is 0 the tool returns nothing, because the division is undefined. Negative values are accepted. Entering both as fractions (0.18 and 0.12) gives the same answer, since only the ratio matters.

Common mistakes

• Entering the change in EBIT in money (for example 120) instead of as a percentage (12). The tool divides whatever you type, so mixing a money amount with a percentage gives a meaningless multiplier.
• Swapping the two boxes. EPS goes on top; reversed, you get 0.67 here, which looks like leverage below 1 and is not what DFL measures.
• Using revenue or net income change instead of EBIT change. DFL isolates the effect of interest costs, so the denominator must be operating profit before interest and tax.
• Taking the figure as a constant. One DFL describes the capital structure at that moment; change the debt or the interest rate and it moves, and it is larger when EBIT is close to interest expense.
• Using share-count changes carelessly. If buybacks or new shares changed the number of shares, the EPS change includes that effect and the ratio no longer shows leverage alone.