operating leverage

operating leverage definition - finance
Occurs when fixed costs comprise the companyÂ’s total costs. As sales increase, the operating costs are spread across a wider number of units of sale, which increases the operating margin and, thus, profits. A higher ratio of fixed costs implies greater operating leverage, as incremental profits are higher than for a company with lower operating leverage.

Webster's New World Finance and Investment Dictionary Copyright © 2003 by Wiley Publishing, Inc., Indianapolis, Indiana.
Used by arrangement with John Wiley & Sons, Inc.

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