What is the degree of combined leverage formula?

DCL = DOL × DFL = contribution margin ÷ (EBIT − interest) = % change in EPS ÷ % change in sales.

What does a DCL of 2.5 mean?

A 1% change in sales leads to about a 2.5% change in earnings per share.

Why multiply DOL and DFL?

Because sales affect EBIT through operating leverage, and EBIT affects EPS through financial leverage; the effects compound.

No. Like DOL and DFL it is measured at a given level of sales and changes as sales change.

Degree of Combined Leverage (DCL) Formula

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Degree of Combined (Total) Leverage Calculator

The degree of combined, or total, leverage measures how much earnings per share change for a given percentage change in sales. It chains the two sources of leverage: operating leverage, from fixed operating costs, magnifies the effect of sales on EBIT, and financial leverage, from fixed interest costs, magnifies the effect of EBIT on EPS. The combined figure is simply DOL × DFL, which reduces to contribution margin ÷ (EBIT − interest).

Formula

DCL = DOL × DFL = Contribution marginEBIT − Interest

Where

DOL: degree of operating leverage = contribution margin ÷ EBIT
DFL: degree of financial leverage = EBIT ÷ (EBIT − interest)
Contribution margin: sales − variable costs

Calculator

Sales revenue

Total variable costs

Fixed operating costs

Interest expense

Result and step-by-step solution

Degree of combined leverage

2.5

A 10% change in sales moves EPS by about 25%.

Contribution margin and EBIT
CM = 500,000.00 − 300,000.00 = 200,000.00; EBIT = 200,000.00 − 100,000.00 = 100,000.00
DOL
200,000.00100,000.00 = 2
DFL
100,000.00100,000.00 − 20,000.00 = 1.25
Combine
2 × 1.25 = 200,000.0080,000.00 = 2.5

How to use the formula

The calculator computes the contribution margin, EBIT, each leverage measure separately and their product, and confirms it against the direct formula. Managers use it to balance the two: a business with high operating leverage, such as a manufacturer with heavy plant, may choose to keep debt low so that total risk stays manageable.

With sales of 500,000, variable costs of 300,000, fixed costs of 100,000 and interest of 20,000, DOL is 2, DFL is 1.25 and DCL is 2.5: a 10% change in sales moves EPS by about 25%. Each component has its own page: DOL and DFL.

Frequently asked questions

What is the degree of combined leverage formula?: DCL = DOL × DFL = contribution margin ÷ (EBIT − interest) = % change in EPS ÷ % change in sales.
What does a DCL of 2.5 mean?: A 1% change in sales leads to about a 2.5% change in earnings per share.
Why multiply DOL and DFL?: Because sales affect EBIT through operating leverage, and EBIT affects EPS through financial leverage; the effects compound.
Is DCL constant?: No. Like DOL and DFL it is measured at a given level of sales and changes as sales change.

Last reviewed: September 26, 2026. Calculations run in your browser and were checked against numpy-financial, SciPy and published spreadsheet examples.