What does high or low operating leverage specify

Question

What does high or low operating leverage specify?

Answer 1

Operating leverage specify about the company and its prospect profitability. It as well assists in assessing the level of risk that has been proposed to the investors. Throughout this investors can approximate the profitability in certain situations. High operating leverage specifies profits and it tells about the company's more money creating policies from each further sale if the raise cost does not rise to produce more sales while low operating leverage indicate the declining of profit margins and declining in earnings.