operating leverage

The percentage of fixed costs in a company's cost structure. Generally, the higher the operating leverage, the more a company's income is affected by fluctuation in sales volume. The higher income vs. sales ratio results from a smaller portion of variable costs, which means the company does not have to pay as much additional money for each unit produced or sold. The more significant the volume of sales, the more beneficial the investment in fixed costs becomes.

Copyright©2009 by InvestorWords.com. ALL RIGHTS RESERVED.

Reproduction of all or part of this glossary and/or this page, in any format, without written consent is prohibited. If you have questions about this dictionary please feel free to contact us feedback\@\investorguide.com