operating leverage


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Operating leverage

Fixed operating costs, which are characterized as leverage because they accentuate variations in profits.

Operating Leverage

The level to which a company is dependent on sales of individual products. That is, a company with only a few sales has a high operating leverage because it must use these few sales to pay its operating expenses. On the other hand, a company with many sales has a low operating leverage and may therefore sell more or fewer products without it affecting its profitability as much.

operating leverage

The extent to which fixed operating costs magnify changes in sales or revenues into even greater proportionate changes in operating income. For example, a company that substitutes robots or other machinery for laborers also substitutes fixed costs for variable costs and increases its operating leverage. High operating leverage tends to produce volatile earnings. Compare financial leverage.

operating leverage

The phenomenon of inflation leading to increased income and expenses each year,at the same time that financing (leverage) expenses remain the same if the borrower has fixed-rate financing.The result is that cash flows increase over time.

References in periodicals archive ?
"BMO continued to deliver strong operating results this quarter demonstrating the resilience of our diversified North American platform, with adjusted earnings per share of $2.38, good revenue growth of 5% and positive operating leverage. Our Canadian and U.S.
* Operating leverage: Compared to 2Q17, the growth rate of total revenue exceeded the growth rate of total expenses, resulting in positive operating leverage of approximately 1.4% points.
GOL's fleet upgauging drives operating efficiency and operating leverage. The 737 MAX will be the backbone of GOL's fleet, increasing average seat per aircraft and bringing incremental cost per seat to very low levels.
For the six months ended 30 June 2018, gross margin was 57%, which rose from 52% in the same period last year, due to an improved product mix and operating leverage.
Pre-tax pre-provision income increased 4 percent over the prior year generating approximately 2 percent in positive operating leverage. Adjusted pre-tax pre-provision income(1) increased 6 percent over the prior year generating approximately 2 percent in positive operating leverage on an adjusted basis(1).
Few of such factors are the level of business risk, revenue generation and the degree of operating leverage .
This was mostly due to the compensatory effects of operating leverage and tight cost controls.
That way, we achieve operating leverage as we execute our growth strategies for our domestic and international operations,' AGI president and chief operating officer Kingson Sian said in a press statement on Monday.
Underwriting returns are a function of underwriting profit and loss margins and operating leverage (premiums/equity).
Consequently, with anticipated increased shipments based on our delivery schedules projected in the second half of 2015, our operating leverage should contribute to improved margins and operating performance, Mitchell added.
Keywords: financial leverage, operating leverage, Return on assets, Return on equity, Net Profit.