Degree of Total Leverage (DTL)

The degree of total leverage (DTL) is defined as: \[DTL\ =\ \frac{\%\ change\ in\ Net\ Income}{\%\ change\ in\ Sales}\ =\ \frac{\dfrac{\Delta Net\ Income}{Net\ Income}}{\dfrac{\Delta Sales}{Sales}}\] Suppose that a company has only variable expenses – 70% of sales – and no interest expense; taxes are 40% of EBT.  If Sales are $100,000 and ΔSales is $1,000, then, […]