degree of financial leverage
Ensured Insurance has a degree of financial leverage (DFL) equal to 4.0 and a degree of total leverage (DTL) equal to 10.0. Ensured expects sales to be $600,000 this year, and its net profit margin is 8 percent. (a) What is Ensured’s degree of operating leverage (DOL)? (b) If Ensured’s sales turn out to be 7 percent higher than expected, what will its net income be?
degree of financial leverage