significant of operating leverage
Answer (1)
Student Expert
11th Dec, 2019
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Greetings!
Operating leverage is quite significant, as it measures the proportion of fixed costs to overall costs. When Operating Leverage is higher it means that fixed cost is more in the cost structure. Lower operating leverage means that fixed costs is less in your cost structure. The degree of operating leverage is used to quantify a companys operating risk. The risk arises due to the structure of fixed and variable costs. Fixed costs do not allow the company to adjust its operating costs to affect its sales. So , operating leverage is quite significant.
I hope it helps you.
Thankyou
Greetings!
Operating leverage is quite significant, as it measures the proportion of fixed costs to overall costs. When Operating Leverage is higher it means that fixed cost is more in the cost structure. Lower operating leverage means that fixed costs is less in your cost structure. The degree of operating leverage is used to quantify a companys operating risk. The risk arises due to the structure of fixed and variable costs. Fixed costs do not allow the company to adjust its operating costs to affect its sales. So , operating leverage is quite significant.
I hope it helps you.
Thankyou
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