Understanding Total Leverage

Corporate finance involves understanding various financial measures to evaluate a company's performance and risk. One important concept is that of total leverage, which assesses how a company's earnings before interest and taxes (EBIT) are impacted by fixed costs and operating leverage. Total leverage reflects the sensitivity of a company's earnings per share (EPS) to changes in sales levels.

Consider a company that has a high level of fixed operational costs alongside its financial leverage from debt. Understanding the total leverage helps in risk assessment, particularly in how earnings will fluctuate with changes in sales. Based on this context, answer the following question: