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Basic Question 4 of 5
The greater the percentage of assets financed by debt, the more sensitive EPS is to any change in ______.
B. operating leverage
C. sales
A. variable financing receipts
B. operating leverage
C. sales
User Contributed Comments 4
| User | Comment |
|---|---|
| setmefree | TDL (total degree of leverage) = DOL*DFL(financial leverage), TDL measures sensitivity of changes in EPS in response to changes in sales; assume a constant degree of leverage, higher DFL indicates higher TDL |
| Khadria | DTL = DOL * DFL = (Delta EBIT / Delta Sales) * (Delta EPS / Delta EBIT) = Delta EPS / Delta Sales |
| kodali | Doesn't real costs affect EBIT |
| myron | yes real costs affect EBIT but it has nothing to do with financing which this question asks. |
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Learning Outcome Statements
evaluate a company's capital investments and capital structure
CFA® 2025 Level I Curriculum, Volume 3, Module 5.