Operating Leverage Capital Structure
Operating leverage capital structure refers to the financial arrangement of a company that relies heavily on fixed costs in order to generate profits. This structure involves a high proportion of fixed costs compared to variable costs, which means that small changes in sales volume can have a significant impact on the company's profitability. Companies with high operating leverage typically have a higher level of financial risk, as they are more susceptible to fluctuations in sales and revenue. This capital structure is often used by companies in industries with high fixed costs, such as manufacturing or telecommunications.