CFA Level 1: DTL Calculation | Test Prep

Which Factors Are Included in Degree of Total Leverage (DTL)?

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Question

Which of the following is not expressly incorporated into the Degree of Total Leverage (DTL) calculation?

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Explanations

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A. B. C. D. E. F.

B

The Degree of Total Leverage (DTL) calculation measures the percentage change in EPS from a given percentage change in sales. The equation used to produce

DTL is as follows: {DTL = [(Sales - Variable Costs) / (Sales - Variable Costs - Fixed Costs - Interest Expense)]. As you can see, the DTL calculation does not involve the use of an explicit discount rate.

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