Operating Leverage
Operating leverage is the extent to which a company's costs are fixed, so that additional revenue falls disproportionately to profit, and lost revenue does the reverse.
Why It Matters
It explains why software margins expand with growth and why capital-heavy businesses suffer quickly when demand slips.
Related Terms
- Gross MarginGross margin is revenue less the direct cost of delivering the product, expressed as a percentage of revenue.
- Unit EconomicsUnit economics is the profit or loss on a single unit of business: one customer, one order or one transaction, once the direct costs of serving it are counted.
- Scale AdvantageA scale advantage is a cost or capability benefit that comes from being larger: better purchasing terms, fixed costs spread wider, or investments rivals cannot match.
- EBITDAEBITDA is earnings before interest, tax, depreciation and amortisation: a measure of operating profit before financing and before the cost of assets already bought.
VANTAGE52 Coverage
Published reporting filed under the topics behind this concept.
Global Economy
Fed Faces a New Test as Inflation Revives Rate-Hike Expectations
U.S. inflation remains above the Federal Reserve’s target as energy prices rise and the labor market shows resilience, forcing investors to reconsider the path of interest rates and the cost of capital across global markets.
Leadership
Right Group And The Strategic Role Of Finance In Sustainable Growth
Growth makes its financial demands long before it returns them, so finance is treated as management.
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