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Definitions from the Web

Operating Leverage

Description:

Operating leverage refers to the degree to which a company uses fixed costs in its operations. It measures the change in operating income resulting from a change in sales volume. High operating leverage indicates a large proportion of fixed costs, while low operating leverage suggests a smaller proportion of fixed costs.

Sample Sentences:

• The company's high operating leverage made it more susceptible to swings in sales volume.
• By reducing fixed costs, the company was able to lower its operating leverage and increase profitability.
• An understanding of operating leverage is crucial in evaluating the financial health of a business.

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