Answer (C) is correct . The percentage-change version of the degree of financial leverage equals the percentage change in net income over the percentage change in EBIT. Accordingly, Nelson’s degree of financial leverage is 2.47 (42% ÷ 17%).
Answer (A) is incorrect because The degree of financial leverage is calculated by dividing the percentage change in net income by the percentage change in EBIT.
Answer (B) is incorrect because The degree of financial leverage is calculated by dividing the percentage change in net income by the percentage change in EBIT.
Answer (D) is incorrect because The degree of financial leverage is calculated by dividing the percentage change in net income by the percentage change in EBIT.
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