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Basic Question 18 of 19

Consider a firm with sales of $500,000, cost of goods sold of $245,000, fixed operating costs of $50,000, and a financing expense of $60,000. The degree of financial leverage for this firm is ______.

A. 1.10
B. 1.24
C. 1.41

User Contributed Comments 7

User Comment
newsky financing expense as the cost of capital
haarlemmer Well, I learned my lesson. It seems to me that I should automatically assume cogs=vc
Shelton DFL=EBIT/(EBIT-I)=(S-VC-F)/(S-VC-F-I) where EBIT=S-VC-F
steved333 COGS is always VC. Financing exp=I. So, EBIT/(EBIT-I) is (S-VC-F)/(S-VC-F-I)
2014 DFL = Q(p - v) - f/ Q(p-v) - f -c
gill15 really got to do the questions in this section.
Akiva What is VC?
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Craig Baugh

Learning Outcome Statements

explain factors affecting capital structure and the weighted-average cost of capital

CFA® 2025 Level I Curriculum, Volume 2, Module 6.