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What Is Combined Leverage

COMBINED LEVERAGE DEFINITION AND MEANING

When the company uses both financial and operating leverage to magnification of any change in sales into a larger relative changes in earning per share. 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.

finance
[Post Image Courtesy of StockImages at FreeDigitalPhotos.net]

Combined leverage can be calculated with the help of the following formulas:

CL = OL × FL

CL = C/OP x OP/PBT = C/PBT

Where,

CL = Combined Leverage

OL = Operating Leverage

FL = Financial Leverage

C = Contribution

OP = Operating Profit (EBIT)

PBT = Profit Before Tax

About Author Mohamed Abu 'l-Gharaniq

when an unknown printer took a galley of type and scrambled it to make a type specimen book. It has survived not only five centuries.

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