Discerning the relationship (DOL/DFL/DTL)
If anyone could help, I’ll appreciate it. I noticed for DOL, DFL, and DTL, there are two discrete ways to perform each calculation.
For operating leverage, DOL= %change of EBIT/%change Units sold or DOL= Q(P-V)/Q(P-V)-F, which is basically the gross profit/EBIT.
For DFL, DFL= %change in Net income/%change EBIT or DFL= [Q(P-V)-F]/[Q(P-V)-F-INT], which is basically EBIT/EBT…and so on.
I’m having a problem discerning how the first formula relates to the second for each of the leverage calculation. For example, how can I relate DFL= %change in Net income/%change EBIT to DFL= [Q(P-V)-F]/[Q(P-V)-F-INT] and so on. Any insight?
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