___________ is a measure of the sensitivity of EBITDA or EBIT to changes in revenue.
A) Total leverage
B) Financial leverage
C) Operating leverage
D) None of the above

Question

Quizplus · Accepted Answer

Operating leverage is the measure of how much fixed costs a business has. The higher the fixed costs, the higher the operating leverage. When a business has a high operating leverage, it means that a small increase in revenue can lead to a much larger increase in EBITDA or EBIT. On the other hand, a small decrease in revenue can lead to a much larger decrease in EBITDA or EBIT. This makes operating leverage an important measure for businesses to consider as they plan their operations and financial strategies.

___________ Is a Measure of the Sensitivity of EBITDA or EBIT