Question

How can a company shift their operating leverage?

Answer 1

Operating leverage refers to how strong is the balacne sheet and financial position of the company to take advantages of the opportunities. Company can shift its operating leverage on a better or lower side by:

• Decreasing or increasing sales
• Decreasing or increasing expenses
• Having a control over expenses
• Increase revenue streams
• Better debtor management

Howver, the change in the operating leverage decreases at higher level as the change in units at higher level, the percentage change from higher base is likely to be less.