Investopedia

Continue to Site »

Degree Of Combined Leverage - DCL

Filed Under » ,
Dictionary Says

Definition of 'Degree Of Combined Leverage - DCL'

A leverage ratio that summarizes the combined effect the degree of operating leverage (DOL), and the degree of financial leverage has on earnings per share (EPS), given a particular change in sales. This ratio can be used to help determine the most optimal level of financial and operating leverage to use in any firm. For illustration, the formula is:

Degree Of Combined Leverage (DCL)
Investopedia Says

Investopedia explains 'Degree Of Combined Leverage - DCL'

This ratio can be very useful, as it summarizes the effects of combining both financial and operating leverage, and what effect this combination, or variations of this combination, has on the corporation's earnings. Not all corporations use both operating and financial leverage, but if they do, then this formula can be used.

It is worth noting that a firm with a relatively high level of combined leverage is seen as riskier than a firm with less combined leverage, as the high leverage means more fixed costs to the firm.

Articles Of Interest

  1.

    Reading The Balance Sheet

    Learn about the components of the statement of financial position and how they relate to each other.

  2. Understanding The Income Statement

    Learn how to use revenue and expenses, among other factors, to break down and analyze a company.

  3. What are the risks of having both high operating leverage and high financial leverage?

    In finance, the term leverage arises often. Both investors and companies employ leverage to generate greater returns on their assets. However, using leverage does not guarantee success, and the ...

  4. Trading Is Timing

    Learn how to make gains even if you don't get in at the right time.

  5. 5 ETFs Flaws You Shouldn't Overlook

    Despite their popularity, exchange traded funds have some drawbacks that investors should know about.

  6. Using The Price-To-Book Ratio To Evaluate Companies

    The P/B ratio can be an easy way to determine a company's value, but it isn't magic!

  7. How To Outperform The Market

    Active trading is an investing style that aims to beat the market. Find out how it works, and whether it will work for you.

  8. Liquidity Vs. Solvency

    Learn about the differences between these two words and how each one is used in the stock market.

  9. Should You Invest Your Entire Portfolio In Stocks?

    It is true that stocks outperform bonds and cash in the long run, but that statistic doesn't tell the whole story.

  10. The Uses And Limits Of Volatility

    Check out how the assumptions of theoretical risk models compare to actual market performance.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Winner's Curse

    Because of incomplete information, emotions or any other number of factors regarding the item being auctioned, bidders can have a difficult time determining the item's intrinsic value. As a result, the largest overestimation of an item's value ends up winning the auction.

  2. Glocalization

    A combination of the words "globalization" and "localization" used to describe a product or service that is developed and distributed globally, but is also fashioned to accommodate the user or consumer in a local market.

  3. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.

  4. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  5. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.

  6. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.
Trading Center