Degree Of Operating Leverage - DOL
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Definition of 'Degree Of Operating Leverage - DOL'
A type of leverage ratio summarizing the effect a particular amount of operating leverage has on a company's earnings before interest and taxes (EBIT). Operating leverage involves using a large proportion of fixed costs to variable costs in the operations of the firm. The higher the degree of operating leverage, the more volatile the EBIT figure will be relative to a given change in sales, all other things remaining the same. The formula is as follows:
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Investopedia explains 'Degree Of Operating Leverage - DOL'
This ratio is useful as it helps the user in determining the effects that a given level of operating leverage has on the earnings potential of the firm. This ratio can also be used to help the firm determine the most appropriate level of operating leverage in order to maximize the company's EBIT.
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Search results for 'Degree Of Operating Leverage (DOL)'
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http://www.investopedia.com/articles/stocks/06/opleverage.asp
... A measure of this leverage effect is referred to as the degree of operating leverage
(DOL), which shows the extent to which operating profits change as sales ...
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http://www.investopedia.com/exam-guide/cfa-level-1/corporate-finance/operating-leverage-effects.asp
... 11.22 Operating Leverage and its Effects on a Project's ... The Tradeoff Theory of Leverage;
11.28 Signaling Prospects ... 11.29 Degree of Total Leverage; 11.30 Dividend ...
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