The degree of financial leverage gives an indication of how a change in EBIT will affect EPS.

Question

Quizplus · Accepted Answer

The degree of financial leverage measures the sensitivity of EPS to changes in EBIT, so a higher degree of financial leverage means that even minor changes in EBIT can have a significant impact on EPS. Therefore, it is true that the degree of financial leverage gives an indication of how changes in EBIT will affect EPS.

The Degree of Financial Leverage Gives an Indication of How