The formula to calculate the Degree of Operating Leverage (DOL) is:
\[ \text{DOL} = \frac{\% \Delta \text{EBIT}}{\% \Delta \text{Sales}} \]
Where:
The Degree of Operating Leverage (DOL) is a leverage ratio that summarizes the effect a particular amount of operating leverage has on a company's earnings before interest and taxes (EBIT) over a period of time.
Let's assume the following values:
Using the formula:
\[ \text{DOL} = \frac{78}{45} \]
Evaluating:
\[ \text{DOL} = 1.73 \]
The Degree of Operating Leverage is 1.73.
| % Change in EBIT | % Change in Sales | Degree of Operating Leverage |
|---|---|---|
| 70% | 40% | 1.75 |
| 70% | 42% | 1.67 |
| 70% | 44% | 1.59 |
| 70% | 46% | 1.52 |
| 70% | 48% | 1.46 |
| 70% | 50% | 1.40 |
| 72% | 40% | 1.80 |
| 72% | 42% | 1.71 |
| 72% | 44% | 1.64 |
| 72% | 46% | 1.57 |
| 72% | 48% | 1.50 |
| 72% | 50% | 1.44 |
| 74% | 40% | 1.85 |
| 74% | 42% | 1.76 |
| 74% | 44% | 1.68 |
| 74% | 46% | 1.61 |
| 74% | 48% | 1.54 |
| 74% | 50% | 1.48 |
| 76% | 40% | 1.90 |
| 76% | 42% | 1.81 |
| 76% | 44% | 1.73 |
| 76% | 46% | 1.65 |
| 76% | 48% | 1.58 |
| 76% | 50% | 1.52 |
| 78% | 40% | 1.95 |
| 78% | 42% | 1.86 |
| 78% | 44% | 1.77 |
| 78% | 46% | 1.70 |
| 78% | 48% | 1.63 |
| 78% | 50% | 1.56 |
| 80% | 40% | 2.00 |
| 80% | 42% | 1.90 |
| 80% | 44% | 1.82 |
| 80% | 46% | 1.74 |
| 80% | 48% | 1.67 |
| 80% | 50% | 1.60 |