DCL

Degree of Combined Leverage

Short definition

The degree of combined leverage (DCL) is the percentage change in EPS for a percentage change in sales. It equals DOL × DFL, or contribution over EBIT minus interest.

Detailed explanation

One formula stacks operating and finance fixed costs. When break-even and interest cover tighten together, DCL explodes — the firm is both thin-margin and indebted, not merely “highly levered”.

Price, volume and rate shocks are three separate doors into DCL. A point DCL does not split them; a scenario table is required.

Why it matters for the CFO

A board that maps the sales budget 1:1 into the profit budget has ignored DCL. Lenders see the same risk in DSCR and a rate shock.

How it is calculated

DCL = %ΔEPS / %ΔSatış = DOL × DFL = Katkı payı / (FVÖK − Faiz)

DOL × DFL is the same local slope as contribution/(EBIT − interest). Preference dividends narrow the denominator.

Variables in the formula

• DCL: degree of combined leverage

How to read it

DCL = 5 means a 4% top-line miss is about a 20% EPS miss in a linear world. Mix and FX break the line. There is no universal target DCL.

Numerical example

DOL = 4, DFL = 1.67 → DCL ≈ 6.7. A 5% sales drop implies ~33.5% EPS drop if other assumptions hold.

Definitions are educational. They are not investment, credit or tax advice.