The correct answer is: Both a and b.
The degree of financial leverage (DFL) measures the extent to which a firm’s earnings per share (EPS) change in response to a change in its EBIT. It is calculated as follows:
$$DFL = \dfrac{EBIT}{EPS}$$
The DFL is zero at the financial break-even point, which is the point at which EBIT is equal to zero. This is because at the financial break-even point, there is no profit or loss, so EPS is also zero.
The DFL increases as EBIT increases. This is because as EBIT increases, EPS increases by a greater amount. For example, if a firm has a DFL of 2, and its EBIT increases by $100, its EPS will increase by $200.
The DFL is a measure of financial risk. A higher DFL indicates that a firm is more leveraged, and therefore more risky. This is because a leveraged firm has more debt, and therefore more interest expense. If EBIT decreases, the interest expense will remain the same, which will reduce EPS. This is why a higher DFL indicates a higher level of financial risk.