Operating Leverage Financial Analysis
Operating leverage financial analysis refers to the examination of how a company's fixed costs impact its profitability. By analyzing a company's operating leverage, analysts can determine the level of risk associated with changes in sales volume. A company with high operating leverage will see a significant increase in profits when sales increase, but will also experience a large decrease in profits when sales decline. Understanding a company's operating leverage can help investors and managers make informed decisions about the company's financial health and stability.