Q229
The Degree of Financial Leverage (DFL)
A.
Measures financial risk of the firm
AnswerB.
Is zero at financial break-even point
C.
Increases as EBIT increases
D.
Both a and b
Answer: Option A
Solution
Answer: Option A
Solution:
The Degree of Financial Leverage (DFL) measures financial risk of the firm. The degree of financial leverage (DFL) measures the percentage change in EPS for a unit change in operating income, also known as earnings before interest and taxes (EBIT).