Operating leverage
Also called: degree of operating leverage, DOL
The way high fixed costs make operating profit change by a larger percentage than revenue, in both directions.
The degree of operating leverage, contribution divided by operating profit, estimates how many percent profit moves for each 1% change in revenue. It is highest just above break-even.
Example
With contribution of ₹60 crore and operating profit of ₹15 crore, the degree is 4, so a 10% rise in revenue lifts profit by about 40%.
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