What is operating leverage in company?



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Hello Sir,

What do we mean by :
1.Very high fixed costs business ?
2.Operating leverage company ?

1 Answer(s)


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Costs that do not change with the volume of goods produced are called fixed costs. For example in a steel company, the cost of machinery is fixed and does not vary based on the amount of steel produced.

Operative leverage indicates how much of revenue flows down into net profits. High operating leverage companies like Google have almost 30-35% of revenue that translates to net profit, whereas low operating leverage companies such as amazon have less than 10% that flows down to net profits

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