The Degree of Financial Leverage represents the sensitivity of net income to changes in operating income. It estimates what the effect on the net income will be if a firm experiences an increase or decrease in operating income.
Some other related topics you might be interested to explore are Degree of Operating Leverage, Degree of Total Leverage, and Contribution margin.
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Degree of Financial Leverage is among the topics included in the Corporate Finance module of the CFA Level 1 Curriculum.
