Operating leverage意思

Operating leverage refers to the extent to which a company can increase its earnings by increasing its sales. It is a measure of the relationship between a company's fixed costs and variable costs. A company with high operating leverage has a large proportion of its costs as fixed costs, which means that a small increase in sales can lead to a large increase in profits. Conversely, a company with low operating leverage has a small proportion of its costs as fixed costs, which means that a large increase in sales is needed to achieve the same level of profit increase.