Enter the percentage change in the EBIT and the percentage change in sales into the calculator. The calculator will evaluate and display the degree of operating leverage.
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Degree of Operating Leverage Formula
The following equation is used to calculate a degree of operating leverage.
DOL = % Change in EBIT / % change in sales
- Where DOL is the degree of operating leverage
- EBIT is the earnings before tax and income
Degree of Operating Leverage Definition
A degree of operating leverage, also known as DOL, is a metric used by business to analyze how a companies operating income changes with changes in sales. The larger the fixed costs and with compared to variable costs, the larger the DOL. The DOL can also be used to determine how changing sales can effect company earnings.
Degree of Operating Leverage Example
How to calculate the degree of operating leverage?
- First, determine the change in EBIT.
Calculate the change in EBIT over some time period.
- Next, determine the change in sales.
Over the same time period, calculate the change in sales.
- Finally, calculate the degree of operating leverage.
Calculate the degree of operating leverage using the formula above.
A degree of operating leverage of DOL for short is a measure of how much a companies sales change with a change in earnings.