Positive and Negative Operating Leverage Definition
Positive and Negative Operating Leverage Definition:
Positive Operating Leverage:
When fixed cost has a greater portion in the total cost structure of the firm / company, a small percentage increase in sales increases a greater percentage in net operating income. This concept is known as positive operating leverage.
Negative Operating Leverage:
A negative operating leverage is a situation where fixed cost has a greater portion in the total cost structure of the company and there is a decrease in sales. Such a situation has a negative effect on the revenue of the firm resulting in a greater percentage decrease in net operating income.
Relevant Terms:
Other Related Accounting Articles:
- Positive Financial Leverage Definition
- Negative Financial Leverage Definition
- Operating Leverage Definition
- Negative Equity
- Degree of Operating Leverage Definition
- Liquidity Gap
- What is a Financial Leverage?
- Net Operating Loss
- Over leveraged
- Operating Income before Depreciation and Amortization OIBDA
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