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Define operating leverage effect and its cause

Define operating leverage effect and what causes it? Describe potential benefits and negative consequences of high operating leverage?
The operating leverage effect is the phenomenon where a small change in sales triggers a comparatively large change in operating income. It is caused through the presence of fixed operating costs. The potential benefits are that if sales are increasing operating income will rise more rapidly. The negative consequences are that falling sales will cause operating income to fall more rapidly, including negative values.

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