Formula
to calculate operating leverage:
Operating
Leverage = percent change in EBIT / percent change in
sales.
Operating
leverage definition and explanation:
The operating
leverage reflects the extent to which a change in sales
affects earnings.
A high
operating leverage ratio, with a highly elastic product
demand, will cause sharp earnings fluctuations.
The operating leverage ratio is included in the financial
statement ratio analysis spreadsheets highlighted in the
left column, which provide formulas, definitions,
calculation, charts and explanations of each ratio.
The operating leverage ratio is listed in our leverage
ratios.
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Spreadsheets to
calculate ratios (includes formulas, definitions,
explanations and charts):
See list
of ratios , or the financial statement ratio
analysis spreadsheets which are not highlighted in the
left column, to see which other ratios our spreadsheets
calculate, define and explain.
The operating leverage
ratio may be included in our
custom 1, 3 or 5 period financial
statement ratio analysis spreadsheet.
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