The Operating Leverage And DOL
Operating leverage is the relationship between a company's fixed and variable costs.
A company with high operating leverage will see its profits go up when its ticket sales increase, because fixed costs remain the same. Likewise, a company with low operating leverage in a declining sales period must still pay its fixed costs, and it will thus suffer bigger losses.
The degree of operating leverage (DOL) of a firm measures how well a company generates profit using its fixed costs.
Learn about how this number provides a measure of how much systematic risk a firm's equity has compared to the market.
Amount of profit realized from a business's operations after taking out operating expenses - such as cost of goods sold (COGS) or wages - and depreciation.
Find out how OCF can be used to value a company based on their ability to generate cash from operation.
Learn more about the measurement used to calculate what proportion of a company's revenue is left over after production costs.
Learn more on how the leverage ratio is used to calculate a company's ability to meet financial obligations and how changes in output will affect operating income.
Learn more on how leveraged investing can help you with higher investment profits through the use of borrowed money.
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