Operating leverage is the degree to which an organisation's cost function is made up of Fixed Costs.

Question

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Operating leverage refers to the extent to which a company's net income can be affected by a change in sales, largely due to its fixed costs structure. High operating leverage means a company has a higher proportion of fixed costs in relation to its variable costs, making its earnings more sensitive to changes in sales volume.

Operating Leverage Is the Degree to Which an Organisation's Cost