MyCalcBuddy

Financial Leverage Calculator

Calculate the Degree of Financial Leverage (DFL) and analyze how EBIT changes affect EPS.

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Important Financial Disclaimer

This calculator provides estimates based on standard financial formulas from verified references. Results are for informational and educational purposes only and should not be considered as professional financial, investment, or tax advice.

For important financial decisions such as loans, investments, mortgages, retirement planning, or tax matters, please consult with qualified financial advisors, certified financial planners, or licensed tax professionals who can review your specific situation.

Calculations may not account for all variables specific to your circumstances, local regulations, or current market conditions. Always verify results and consult professionals before making financial commitments.

Not a substitute for professional financial advice

Financial Data

$100,000
$10,000$1,000,000
$20,000
$0$500,000
25%
0%50%
100,000 shares
1,000 shares10,000,000 shares
10%
-50%50%

Degree of Financial Leverage (DFL)

1.25x

A 10% change in EBIT = 12.5% change in EPS

Net Income
$60,000
EPS
$0.60
Interest Coverage
5.00x

Healthy

Taxes
$20,000

Income Statement Summary

Operating Income (EBIT)$100,000
- Interest Expense($20,000)
EBT$80,000
- Taxes (25%)($20,000)
Net Income$60,000

What-If: 10% EBIT Change

New EBIT$110,000
New Net Income$67,500
New EPS$0.68
EPS Change+12.5%

Financial Leverage Formula

DFL = EBIT / (EBIT - Interest) = EBIT / EBT

High Financial Leverage

More debt relative to equity. EPS is more sensitive to changes in operating income. Higher risk but potentially higher returns to shareholders.

Interest Coverage

Ratio of EBIT to interest expense. Generally, 3x or higher is considered healthy. Below 1.5x may indicate financial stress.

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sources

  • •Reserve Bank of India (RBI) — Financial regulations, lending rates, and monetary policy guidelines. rbi.org.in
  • •Consumer Financial Protection Bureau (CFPB) — Consumer finance guidelines, mortgage and loan disclosure standards. consumerfinance.gov
  • •Securities and Exchange Board of India (SEBI) — Investment and securities market regulations. sebi.gov.in
  • •Investopedia — Financial formulas, definitions, and educational content. investopedia.com

For a complete list of all references used across the site, visit our full sources page.

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Editorial Note

MyCalcBuddy Editorial Team

This page is maintained as an educational calculator reference.

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Formula Source: Fundamentals of Financial Management

by Brigham & Houston

🔄Last reviewed: May 2026
✓Formula checks are based on standard references and internal QA review.