operating leverage
Definition
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.
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Related Terms
leverage
'operating leverage
' appears in the definitions of these terms on BusinessDictionary.com
investment leverage, operating risk, operation gearing, financial leverage, leverage
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