The degree of financial leverage refers to the ratio of the change rate of earnings per share (EBIT) to the change rate of earnings before interest and tax.
The formula is: financial leverage (DFL) = (△ EPS/EPS)/(△ ebit/ebit) = ebit/(ebit-I).
The first year:
The financial leverage of Huaxin Company: DFL = 200/(200-10) =1.05.
The financial leverage of Sanmu Company: DFL =200/(200-50)= 1.33.
The second year:
The financial leverage of Huaxin Company: DFL = 50/(50-10) =1.25.
The financial leverage of Miki Company: DFL =50/(50-50)=∞, and there is no surplus.
The financial leverage of Sanmu Company is greater than that of Huaxin Company, which means that the earnings per share of Sanmu Company are more affected by the earnings before interest and tax than that of Huaxin Company, which means that the shareholders' equity of Sanmu Company is more affected by the earnings before interest and tax. Therefore, when the return on capital fell in the second year, that is, earnings before interest and tax fell, the decline of earnings per share of Sanmu Company was greater than that of Huaxin Company, so the decline of shareholders' equity of Sanmu Company was even greater, and the net interest rate of shareholders' equity of Huaxin Company was higher.
The specific calculation depends on the formula, just do it yourself.
Net interest rate of equity = net interest rate of operating assets+(net interest rate of operating assets-after-tax interest rate) * net financial leverage.
This was calculated by others, too. I just moved it. )