Degree of financial leverage is defined as :a)The percentage change in the earnings before interest and taxes relative to a given percentage change in salesb)The percentage change in EPS due to a given percentage change in EBITc)The percentage change in interest rate in relation to the changes in quantum of debtd)The percentage sales in relation to percentage change in EBITCorrect answer is option 'B'. Can you explain this answer?

EduRev

All Courses

Explore Courses UPSC Exam UPSC Test Series Free Notes EduRev Infinity

Open App

UGC NET Exam > UGC NET Questions > Degree of financial leverage is defined as :a...

Join the Discussion on the App

Degree of financial leverage is defined as :

a)
The percentage change in the earnings before interest and taxes relative to a given percentage change in sales
b)
The percentage change in EPS due to a given percentage change in EBIT
c)
The percentage change in interest rate in relation to the changes in quantum of debt
d)
The percentage sales in relation to percentage change in EBIT

Correct answer is option 'B'. Can you explain this answer?

FREE This question is part of

UGC NET Paper 2 Mock Test - 4 (Management)

Attempt Test

Attempt this Test

Most Upvoted Answer

Degree of financial leverage is defined as :a)The percentage change in...

Leverage:

Leverage is a company’s capacity to utilize new resources or assets to make better returns or diminish costs.
Leverage is a reason that is influential for any organization is extremely huge.
As a rule, leverage implies the impact of one variable over another.
There are three proportions of leverage that are financial leverage, operating leverage, and combined leverage.
The financial leverage assesses the impact of interest costs, while the operating leverage estimates the impact of fixed costs.

Key Points

The usage of such sources of assets that convey fixed monetary charges or financial in an organization’s monetary structure to procure more profit from speculation is known as financial leverage.
The degree of financial leverage (DFL) is utilized to gauge the impact on earnings per share (EPS) because of the adjustment of firms’ working benefit or operating profit, for example, EBIT.
At the point when an organization utilizes obligation assets in its capital construction having fixed monetary charges as interest, it is said that the firm utilized monetary influence.
The DFL depends on interest and money charges; in the event that these expenses are higher, DFL will likewise be higher, which will, at last, bring about the monetary gamble of the organization.

Important Points

The formula to calculate the degree of financial Leverage is:

DFL = % Change in EPS / % Change in EBIT

DFL = EBIT/ EBT

Hence, Degree of financial leverage is defined as the percentage change in EPS due to a given percentage change in EBIT.

Answered by JKL Classes · View profile

Free Test

FREE

UGC NET Paper 2 Mock Test - 4 (Management)
100 Ques | 120 Min

Start Free Test

View all free UGC NET tests

Community Answer

Degree of financial leverage is defined as :a)The percentage change in...

Leverage:

Leverage is a company’s capacity to utilize new resources or assets to make better returns or diminish costs.
Leverage is a reason that is influential for any organization is extremely huge.
As a rule, leverage implies the impact of one variable over another.
There are three proportions of leverage that are financial leverage, operating leverage, and combined leverage.
The financial leverage assesses the impact of interest costs, while the operating leverage estimates the impact of fixed costs.

Key Points

The usage of such sources of assets that convey fixed monetary charges or financial in an organization’s monetary structure to procure more profit from speculation is known as financial leverage.
The degree of financial leverage (DFL) is utilized to gauge the impact on earnings per share (EPS) because of the adjustment of firms’ working benefit or operating profit, for example, EBIT.
At the point when an organization utilizes obligation assets in its capital construction having fixed monetary charges as interest, it is said that the firm utilized monetary influence.
The DFL depends on interest and money charges; in the event that these expenses are higher, DFL will likewise be higher, which will, at last, bring about the monetary gamble of the organization.

Important Points

The formula to calculate the degree of financial Leverage is:

DFL = % Change in EPS / % Change in EBIT

DFL = EBIT/ EBT

Hence, Degree of financial leverage is defined as the percentage change in EPS due to a given percentage change in EBIT.

Share via Whatsapp

Attention UGC NET Students!

To make sure you are not studying endlessly, EduRev has designed UGC NET study material, with Structured Courses, Videos, & Test Series. Plus get personalized analysis, doubt solving and improvement plans to achieve a great score in UGC NET.

UGC NET Mock Test Series 2024

UGC NET Past Year Papers

Crash Course for UGC NET Education

Mathematical Reasoning and Aptitude for UGC NET

View all answers Start learning for free

< Previous Question Next Question >

Explore Courses for UGC NET exam

Similar UGC NET Doubts

The relationship between the firms EBIT and earnings available for shareholders is known as

View answer

Indicate the statement which is not correct:i. Credit risk is loss on account of default of repayment of loan.ii. Liquidity risk is the risk on account of the mismatches of cash inflow and outflow in a firm.iii. Basic risk is the risk in a firm owing to the differences in the index to which financial assets and liabilities are tied up.iv. Forward rate agreement is a contract where a borrower/lender locks the interest rate and protects itself from the loss on account of change in the future interest rate.

View answer

Ratio is an index that measures one variable relative to another and is generally expressed as a percentage or a rate. The ratio that tests how leveraged an organisation is, may be referred to as

View answer

The graph represents the average score of a Test player with respect to the number of Test matches he played.Determined the percentage change in average score b/w 10 - 40 match.

View answer

________ is a statement prepared to compare components of financial statements of two years by converting them into percentages taking a common base.

View answer

Top Courses for UGC NETView all

UGC NET Mock Test Series 2024

UGC NET Past Year Papers

Crash Course for UGC NET Education

Mathematical Reasoning and Aptitude for UGC NET

Teaching Aptitude for Teaching Exam

Top Courses for UGC NET

View all

Degree of financial leverage is defined as :a)The percentage change in the earnings before interest and taxes relative to a given percentage change in salesb)The percentage change in EPS due to a given percentage change in EBITc)The percentage change in interest rate in relation to the changes in quantum of debtd)The percentage sales in relation to percentage change in EBITCorrect answer is option 'B'. Can you explain this answer?

Share with a Friend

Answer this doubt

Question Description
Degree of financial leverage is defined as :a)The percentage change in the earnings before interest and taxes relative to a given percentage change in salesb)The percentage change in EPS due to a given percentage change in EBITc)The percentage change in interest rate in relation to the changes in quantum of debtd)The percentage sales in relation to percentage change in EBITCorrect answer is option 'B'. Can you explain this answer? for UGC NET 2024 is part of UGC NET preparation. The Question and answers have been prepared according to the UGC NET exam syllabus. Information about Degree of financial leverage is defined as :a)The percentage change in the earnings before interest and taxes relative to a given percentage change in salesb)The percentage change in EPS due to a given percentage change in EBITc)The percentage change in interest rate in relation to the changes in quantum of debtd)The percentage sales in relation to percentage change in EBITCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for UGC NET 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Degree of financial leverage is defined as :a)The percentage change in the earnings before interest and taxes relative to a given percentage change in salesb)The percentage change in EPS due to a given percentage change in EBITc)The percentage change in interest rate in relation to the changes in quantum of debtd)The percentage sales in relation to percentage change in EBITCorrect answer is option 'B'. Can you explain this answer?.

Solutions for Degree of financial leverage is defined as :a)The percentage change in the earnings before interest and taxes relative to a given percentage change in salesb)The percentage change in EPS due to a given percentage change in EBITc)The percentage change in interest rate in relation to the changes in quantum of debtd)The percentage sales in relation to percentage change in EBITCorrect answer is option 'B'. Can you explain this answer? in English & in Hindi are available as part of our courses for UGC NET. Download more important topics, notes, lectures and mock test series for UGC NET Exam by signing up for free.

Here you can find the meaning of Degree of financial leverage is defined as :a)The percentage change in the earnings before interest and taxes relative to a given percentage change in salesb)The percentage change in EPS due to a given percentage change in EBITc)The percentage change in interest rate in relation to the changes in quantum of debtd)The percentage sales in relation to percentage change in EBITCorrect answer is option 'B'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of Degree of financial leverage is defined as :a)The percentage change in the earnings before interest and taxes relative to a given percentage change in salesb)The percentage change in EPS due to a given percentage change in EBITc)The percentage change in interest rate in relation to the changes in quantum of debtd)The percentage sales in relation to percentage change in EBITCorrect answer is option 'B'. Can you explain this answer?, a detailed solution for Degree of financial leverage is defined as :a)The percentage change in the earnings before interest and taxes relative to a given percentage change in salesb)The percentage change in EPS due to a given percentage change in EBITc)The percentage change in interest rate in relation to the changes in quantum of debtd)The percentage sales in relation to percentage change in EBITCorrect answer is option 'B'. Can you explain this answer? has been provided alongside types of Degree of financial leverage is defined as :a)The percentage change in the earnings before interest and taxes relative to a given percentage change in salesb)The percentage change in EPS due to a given percentage change in EBITc)The percentage change in interest rate in relation to the changes in quantum of debtd)The percentage sales in relation to percentage change in EBITCorrect answer is option 'B'. Can you explain this answer? theory, EduRev gives you an ample number of questions to practice Degree of financial leverage is defined as :a)The percentage change in the earnings before interest and taxes relative to a given percentage change in salesb)The percentage change in EPS due to a given percentage change in EBITc)The percentage change in interest rate in relation to the changes in quantum of debtd)The percentage sales in relation to percentage change in EBITCorrect answer is option 'B'. Can you explain this answer? tests, examples and also practice UGC NET tests.

Explore Courses for UGC NET exam