<h2>Degree of Operating Leverage (DOL)</h2>
<p>The <strong>degree of operating leverage (DOL)</strong> is a financial metric that measures the sensitivity of a company's operating income to changes in its sales. It's a tool used to assess the risk profile of a business, particularly its exposure to business cycle fluctuations.</p>

<h2>How It Works</h2>
<p>DOL is calculated as the ratio of operating income (EBIT) to net income. It can also be expressed as the reciprocal of the company's profit margin. Here's the formula:</p>
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    <td><strong>DOL = EBIT / Net Income</strong></td>
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<p>Alternatively, it can be calculated as:</p>
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    <td><strong>DOL = 1 / Profit Margin</strong></td>
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<p>For example, a company with an operating income of $100,000 and a net income of $50,000 would have a DOL of 2:</p>
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    <td><strong>DOL = $100,000 / $50,000 = 2</strong></td>
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<h2>Why It Matters for Traders</h2>
<p>DOL is crucial for traders as it helps evaluate the risk-return profile of a company's stock. A high DOL indicates that the company's operating income is highly sensitive to changes in sales, making it riskier but potentially more profitable. Conversely, a low DOL suggests less risk but also lower potential returns.</p>
<p>For instance, a trader using the MetaTrader 5 platform might use DOL to compare two stocks in the same sector. A higher DOL in one stock might signal greater volatility and risk, but also the potential for larger gains if the company's sales increase.</p>

<h2>Example</h2>
<p>Consider two companies, A and B, both in the retail sector. Company A has a DOL of 3, while Company B has a DOL of 1.5. If both companies experience a 10% increase in sales, Company A's operating income would increase by 30%, while Company B's would increase by only 15%. However, if sales decrease by 10%, Company A's operating income would drop by 30%, compared to Company B's 15% decrease.</p>

<h2>Key Takeaways</h2>
<ul>
  <li>DOL measures a company's sensitivity to changes in sales.</li>
  <li>A high DOL indicates greater risk but potentially higher returns.</li>
  <li>DOL is calculated as the ratio of operating income to net income or as the reciprocal of the profit margin.</li>
  <li>Traders can use DOL to compare the risk-return profiles of different stocks.</li>
</ul>