Degree of Total Leverage (DTL)
Calculate the degree of total leverage (DTL), the percentage change in net income for each percentage change in revenue: the operating and financial leverage combined.
The DTL is the product of the degree of operating leverage (get_degree_of_operating_leverage) and the degree of financial leverage (get_degree_of_financial_leverage) over the same periods, and measures how strongly a change in revenue carries through to the earnings of the shareholders.
The formula is as follows:
\[\text{DTL} = \%\Delta \;\text{Net Income} / \%\Delta \;\text{Revenue} = \text{DOL}\; x \;\text{DFL}\]The changes are period over period with annual data and year over year with quarterly data (a quarter against the same quarter a year earlier), so seasonality does not enter. Each change is (Value - Previous Value) / |Previous Value|, so a change from a negative base keeps its sign. The ratio is unstable when the denominator barely changes: a small change in it gives a very large degree, and no change gives NaN.
Also known as: DTL, degree of combined leverage, DCL, combined leverage, total leverage.
Degree of Total Leverage (DTL) in Python or via the MCP
Install the Finance Toolkit with:
pip install financetoolkit -U
Then call get_degree_of_total_leverage as shown below.
from financetoolkit import Toolkit
toolkit = Toolkit(
["AAPL", "F", "DAL"],
api_key="FINANCIAL_MODELING_PREP_KEY",
start_date="2021-01-01",
end_date="2025-12-31",
)
toolkit.ratios.get_degree_of_total_leverage()
Or, after setting up the Finance Toolkit MCP, ask:
What was the degree of total leverage of Apple, Ford and Delta Air Lines from 2021 to 2025?
Which returns:
| 2021 | 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|---|
| AAPL | 1.9518 | 0.6943 | 1.0047 | -1.6617 | 3.034 |
| DAL | 1.3653 | 5.359 | 16.9169 | -4.0358 | 16.0389 |
| F | 207.703 | -6.9718 | 27.8421 | 7.0554 | -194.484 |
Parameters
get_degree_of_total_leverage accepts the following parameters.
| Parameter | Type | Description | Example |
|---|---|---|---|
rounding | int | None | The number of decimals to round the results to. Defaults to None, which uses the rounding of the Toolkit (4 unless set otherwise). | 2 |
growth | bool | Whether to calculate the growth of the ratios. Defaults to False. | True |
lag | int | list[int] | The lag to use for the growth calculation. Defaults to 1. | 4 |
compound | bool | Whether the growth is the compound annual growth rate over the lag (e.g. lag=5 for the five-year CAGR) instead of the total change. Defaults to False. | False |
standardize | bool | Whether to standardize (Z-Score) the result. When combined with growth=True, standardizes the growth values instead of the raw values. Defaults to False. | True |
trailing | int | The number of periods to sum the flows over before their changes are compared, e.g. 4 with quarterly data compares trailing twelve months with those a year earlier. Defaults to None, which uses single-period flows. | 4 |