# Operating Leverage

*Accounting & Reporting — Finicade finance glossary*

Operating leverage is how much profit amplifies a change in revenue, driven by the share of costs that are fixed. A business with high fixed costs and low variable costs — software, airlines, cinemas — sees profit explode as volume rises and collapse as it falls. It's the operational analogue of financial leverage, and the two multiply: a company with both is spectacular in a boom and fragile in a downturn.

**Also known as:** degree of operating leverage, fixed cost leverage

**Related terms:** [Fixed vs Variable Costs](https://finicade.com/glossary/fixed-vs-variable-costs), [Contribution Margin](https://finicade.com/glossary/contribution-margin), [Break-Even Analysis](https://finicade.com/glossary/break-even-analysis), [Operating Margin](https://finicade.com/glossary/operating-margin), [Economies of Scale](https://finicade.com/glossary/economies-of-scale)

Source: https://finicade.com/glossary/operating-leverage