Degree Of Combined Leverage - DCL

For those of you who are fans of The Big Bang Theory and quantitative theory in general, a) sorry and b) this one's for you: The Degree of Combined Leverage, or DCL, is a ratio to determine how operating leverage and financial leverage can affect earnings per share. The formula runs:

DCL= (% EPS change/% Sales Change) = Degree of Operating Leverage x Degree of Financial Leverage

DOL is calculated as the change % of company earnings before interest & taxes (EBIT) divided by % change of previous year, quarter, or similar time period.

DFL is calculated as the change % of EPS divided by the change % of EBIT.

You'll love running these calculations as your boss drums her fingers, angrily waiting for the numbers. Bazinga.