BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -Combined leverage is also called as composite leverage or total leverage. Combined leverage express the relationship between the revenue in the account of sales and the taxable income. The percentage change in a firm’s earning per share (EPS) results from one percent change in sales.

Detailed explanation-2: -Operating leverage is concerned with the relationship between the firm’s revenue and its earnings before interest and taxes (EBIT). Financial leverage is concerned with the relationship between the firm’s EBIT and its common stock earnings per share (EPS).

Detailed explanation-3: -A degree of combined leverage (DCL) is a leverage ratio that summarizes the combined effect that the degree of operating leverage (DOL) and the degree of financial leverage has on earnings per share (EPS), given a particular change in sales.

Detailed explanation-4: -The degree of financial leverage (DFL) measures the percentage change in EPS for a unit change in operating income, also known as earnings before interest and taxes (EBIT).

Detailed explanation-5: -Combined leverage is the blend of the two leverages, i.e. financial leverage and operating leverage. While operating leverage outlines the impact of progress or effects of change in sales on the organisation’s working income or operating earnings, financial leverage mirrors the adjustment of EBIT on the EPS level.