The Operating Leverage And DOL

Next video:
Loading the player...

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.

You May Also Like

Related Articles
  1. Investing Basics

    Unlevered Beta

  2. Investing Basics

    Operating Income

  3. Investing

    Operating Cash Flow

  4. Investing

    Calculating Operating Margin

  5. Investing

    Understanding The Leverage Ratio

  6. Investing


  7. Fundamental Analysis

    Do Stock Splits Cause Volatility?

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!