Question

High operating leverage means

Answer 1

Operating leverage is the level by which a company generates its Operating income by increase in Sales revenue. Generally a business having High Fixed in Comparison to variable cost has a high Operating Leverage and Low Fixed cost in comparison to Variable cost shows low Operating Leverage.

In Other Words High Operating Leverage means The Company is generating more profits when the sales units are increased. This is because fixed cost does not change with the change in Units sold and when Units Sold Increase the Overall cost per unit decrease which increases profit more than normal level.