Operating leverage is

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Operating leverage refers to the use of fixed costs to extract higher percentage changes in profits as sales activity changes. In other words, it measures the degree to which a firm uses fixed costs rather than variable costs in its operations. A company with high operating leverage will have a greater percentage change in profits for a given percentage change in sales, while a company with low operating leverage will have a smaller percentage change in profits for the same level of sales change.

Operating Leverage Is