14
Planning Profits
In This Chapter
The concepts of operating leverage and financial leverage are key to understanding how fluctuating market conditions will affect its profitability.
A company is said to be leveraged when it incurs either fixed operating costs, referred to as operating leverage, or fixed capital costs, referred to as financial leverage.
A company’s degree of operating leverage is a function of its sales, its fixed and its variable operating expenses such as the following costs:
Fixed manufacturing costs such as equipment leases
Fixed selling costs such as the salaries of sales support staff
Fixed administrative costs such as that ...
Get Business Analysis with Microsoft Excel, Fifth Edition now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
