Worked examples
Example 1 · level 1
Kapoor Electricals: sales ₹5,90,000, variable cost ₹2,36,000, fixed operating cost ₹2,12,000, interest ₹28,000. Find the degree of operating leverage (two decimals).
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- Contribution = ₹5,90,000 − ₹2,36,000 = ₹3,54,000.
- EBIT = ₹3,54,000 − ₹2,12,000 = ₹1,42,000; EBT = ₹1,42,000 − ₹28,000 = ₹1,14,000.
- DOL = 3,54,000 ÷ 1,42,000 = 2.49.
Answer: 2.49
Example 2 · level 2
Kapoor Electricals: sales ₹4,40,000, variable cost ₹2,64,000, fixed operating cost ₹1,06,000, interest ₹18,000. Find the degree of financial leverage (two decimals).
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- Contribution = ₹4,40,000 − ₹2,64,000 = ₹1,76,000.
- EBIT = ₹1,76,000 − ₹1,06,000 = ₹70,000; EBT = ₹70,000 − ₹18,000 = ₹52,000.
- DFL = 70,000 ÷ 52,000 = 1.35.
Answer: 1.35
Example 3 · level 3
Patel Packaging: sales ₹6,50,000, variable cost ₹3,90,000, fixed operating cost ₹1,04,000, interest ₹39,000. Find the degree of combined leverage (two decimals).
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- Contribution = ₹6,50,000 − ₹3,90,000 = ₹2,60,000.
- EBIT = ₹2,60,000 − ₹1,04,000 = ₹1,56,000; EBT = ₹1,56,000 − ₹39,000 = ₹1,17,000.
- DCL = 2,60,000 ÷ 1,17,000 = 2.22.
Answer: 2.22