The degree of financial leverage (DFL) refers to the change rate of after-tax profit per share of common stock equivalent to the multiple of earnings before interest and tax, also known as the degree of financial leverage. It is usually used to reflect the size and function of financial leverage and evaluate the financial risk of enterprises.

The calculation formula of financial leverage is:

DFL=(△EPS/EPS)/(△EBIT/EBIT)

Where: DFL is the degree of financial leverage; △EPS is the change of profit per share of common stock; EPS is the profit per share of common stock before the change; △EBIT is the change of earnings before interest and tax; EBIT is the income before interest and tax.