Operating leverage refers to the relative amount of fixed and variable costs that make up total costs for a company.

Question

Quizplus · Accepted Answer

Operating leverage is defined as the degree to which a company uses fixed costs in its operations, which affects its earnings before interest and taxes (EBIT). It is calculated as the percentage change in EBIT divided by the percentage change in sales, and reflects the relative amount of fixed and variable costs that make up a company's total costs.

Operating Leverage Refers to the Relative Amount of Fixed and Variable