Financial Leverage Calculator

Formula

The formula to calculate Financial Leverage (FL) is:

\[ FL = \frac{EBIT}{EBT} \]

Where:

$ FL $ is the financial leverage.
$ EBIT $ is the earnings before interest and tax ($).
$ EBT $ is the earnings before tax ($).

Example

Let's say the earnings before interest and tax ($ EBIT $) is $100,000 and the earnings before tax ($ EBT $) is $50,000. Using the formula:

\[ FL = \frac{100,000}{50,000} \]

We get:

\[ FL = 2 \]

So, the Financial Leverage ($ FL $) is 2.

What is Financial Leverage?

Financial leverage is a metric that describes how well a company performs relative to its interest earnings. In other words, it is the ratio of EBIT to EBT.