📖 Business terms
Operating leverage
When small changes in sales cause big changes in profit.
Businesses with high fixed costs have high operating leverage: once fixed costs are covered, extra sales drop almost straight to profit — and losses grow fast when sales fall.
🧮 Example
A software firm's 10% revenue increase can lift profit 40%, because serving extra users costs very little.
🎯 Interview tip
Use it to explain why profits swing more than revenue in a case.
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