Because the degree of financial leverage is a measure of the change in earnings available to common stockholders associated with a given change in operating earnings.
The degree of operating leverage (DOL) is a measure of the change in net operating income associated with a given change in sales volume. For a particular level of output, Degree of Operating Leverage is calculated as follows: % Change in Operating Profit (EBIT) % Change in Revenue
Because the degree of total leverage is the multiple of the degree of operating leverage and the degree of financial leverage. Other things being equal, DOL is higher if the degree of total leverage is higher.
Because the degree of total leverage is the multiple of the degree of operating leverage and the degree of financial leverage. Other things being equal, DOL is higher if the degree of total leverage is higher.
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