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Measure of Leverage


Leverage is present because of:

  • Fixed Operating Costs
  • Use of Debt in capital structure z
  • Breakeven:

When Profit = 0 and Revenue = Costs

  • Breakeven Points:


  • Operating Break Even:

  • Degree of Operating Leverage:


  • Degree of Financial Leverage:


  • Degree of Total Leverage = DOL * DFL


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