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  • WSP Degree of Financial Leverage DFL Calculator VF

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    Salah Hussein
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    This document contains a template for calculating the degree of financial leverage (DFL) for an all-equity firm and a debt-equity firm. It shows example calculations for firms experiencing positive and negative growth. For the all-equity firm, the DFL is always 1.0x because interest expense is zero. For the debt-equity firm, the DFL is always 2.0x because interest expense creates more volatility in net income compared to EBIT. The template is proprietary to Wall Street Prep and intended for training purposes only.

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    This document contains a template for calculating the degree of financial leverage (DFL) for an all-equity firm and a debt-equity firm. It shows example calculations for firms experiencing positive and negative growth. For the all-equity firm, the DFL is always 1.0x because interest expense is zero. For the debt-equity firm, the DFL is always 2.0x because interest expense creates more volatility in net income compared to EBIT. The template is proprietary to Wall Street Prep and intended for training purposes only.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
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    6 views2 pages

    WSP Degree of Financial Leverage DFL Calculator VF

    Uploaded by

    Salah Hussein
    This document contains a template for calculating the degree of financial leverage (DFL) for an all-equity firm and a debt-equity firm. It shows example calculations for firms experiencing positive and negative growth. For the all-equity firm, the DFL is always 1.0x because interest expense is zero. For the debt-equity firm, the DFL is always 2.0x because interest expense creates more volatility in net income compared to EBIT. The template is proprietary to Wall Street Prep and intended for training purposes only.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
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    Degree of Financial Leverage (DFL) Calculator Template

    Modeling Template: The enclosed model is proprietary to Wall Street Prep and are designed for illustrative and training
    purposes only. Distributing, sharing, duplicating or altering these models in any way is prohibited without the written
    consent of Wall Street Prep, Inc. For more information about our training programs, please contact us at 800-646-3575 or
    visit us online at wallstreetprep.com.
    Degree of Financial Leverage (DFL) Calculator
    ($ in millions)

    All-Equity Firm Positive Growth Negative Growth


    Year 1 Year 2 Year 1 Year 2
    EBIT $10 $15 $10 $5
    (–) Interest Expense -- -- -- --
    Pre-Tax Income $10 $15 $10 $5
    (–) Taxes -- -- -- --
    Net Income $10 $15 $10 $5

    % Change in Net Income 50.0% (50.0%)


    % Change in EBIT 50.0% (50.0%)
    Degree of Financial Leverage (DFL) 1.0x 1.0x

    Debt-Equity Firm Positive Growth Negative Growth


    Year 1 Year 2 Year 1 Year 2
    EBIT $10 $15 $10 $5
    (–) Interest Expense (5) (5) (5) (5)
    Pre-Tax Income $5 $10 $5 --
    (–) Taxes -- -- -- --
    Net Income $5 $10 $5 --

    % Change in Net Income 100.0% (100.0%)


    % Change in EBIT 50.0% (50.0%)
    Degree of Financial Leverage (DFL) 2.0x 2.0x

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