Operating Leverage Ratio
Formula to calculate operating leverage:
Operating Leverage = percent change in EBIT / percent change in sales.
Operating leverage definition and explanation:
The operating leverage reflects the extent to which a change in sales affects earnings.
A high operating leverage ratio, with a highly elastic product demand, will cause sharp earnings fluctuations.
The operating leverage ratio is included in the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.
The operating leverage ratio is listed in our leverage ratios.
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