Define operative leaverage?

Question

answer me with detail calculation

Answer 1

Its measures how revenue growth translates into growth in operating income.  Refer to source for calculation options.....

Answer 2

The percentage of fixed costs in a company's cost structure. Generally, the higher the operating leverage, the more a company's income is affected by fluctuation in sales volume. The higher income vs. sales ratio results from a smaller portion of variable costs, which means the company does not have to pay as much additional money for each unit produced or sold. The more significant the volume of sales, the more beneficial the investment in fixed costs becomes.

Formula(s) for calculating Operating leverage :

http://dwc.hct.ac.ae/courses/badm300/htm...

Regards

Hari Krishnan

Hari Somanath

Answer 3

I will try to put herisomas answer in simple English. Most companies that manufacture products have two types of cost: Fixed and Variable. The fixed costs are always there and do not vary over the short run. Variable costs increase directly with the number of units produced. The idea in business is the cover all your costs and make a profit. Sales dollars need to be high enough to cover your fixed and variable costs. Once Sales dollars cover your fixed costs you incur operating leverage. Since fixed cost are covered, any sales you make above the fixed cost point does not have to contribute to fixed costs only to variable costs so you profit per unit becomes greater, thus operating leverage. Break-even point analysis will help you understand the concept.