Management Glossary

  Search Results: operating leverage
operating leverage
The ratio of fixed to variable costs in a company's operations. A company is said to have high operating leverage when a large percentage of its costs are fixed. Operating profit fluctuations are more closely correlated to sales fluctuations for companies with high operating leverage than for ones with low operating leverage because when variable costs are low a higher percentage of the price of each product or service sold is take in profit rather than cost.
Contributed by: ManagerWise Staff
See: fixed cost, variable cost, operating profit

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