The degree of financial leverage is measured by relating the percentage change in earnings per share to the percentage change in:

A) sales.
B) EBIT.
C) debt ratio.
D) share price.

Degree of Financial Leverage

A measure that quantifies the sensitivity of a company's earnings per share to fluctuations in its operating income due to the use of fixed cost financing.

Earnings per Share

A company's net profit divided by the number of its common shares outstanding, indicating the company's profitability on a per-share basis.

EBIT

Earnings Before Interest and Taxes; a measure of a firm's profit that includes all expenses except interest and income tax expenses.