Microlesson · 5-min read

Comparison of DOL, DFL and DCL

# OL vs FL vs CL — Comparison

A consolidated comparison of the three leverages:

Aspect	DOL	DFL	DCL
Risk shown	Business risk	Financial risk	Total / combined risk
Depends on	Fixed (operating) cost	Interest & preference dividend	Fixed cost + interest + preference dividend
Measures	% change in EBIT per 1% change in Sales	% change in EPS per 1% change in EBIT	% change in EPS per 1% change in Sales
Uniqueness	Unique DOL for each level of output	Unique DFL for each level of EBIT	Unique DCL for each level of sales
Undefined at	Operating BEP	Financial BEP	Financial BEP

## How to read the chain

Worked example

### Example 1

DOL: DOL = 3, output up 8% → EBIT up 24%; output down 8% → EBIT down 24%.

### Example 2

DFL: DFL = 2, EBIT up 5% → EPS up 10%; EBIT down 5% → EPS down 10%.

### Example 3

DCL: DCL = 6, sales up 8% → EPS up 48%; sales down 8% → EPS down 48%.

Mixing up the input/output of each leverage — DOL starts from Sales, DFL starts from EBIT, DCL starts from Sales.
Thinking DCL is undefined at the operating BEP — it (like DFL) is undefined at the financial BEP.

Reference:

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