Fundamental Analysis & Valuation
2 terms
Operating Leverage
Fundamental Analysis & Valuation
ratio (x, times)
The degree to which a company's fixed costs amplify the effect of a revenue change on its operating profit.
Degree of Operating Leverage = Percentage Change in Operating Profit / Percentage Change in Revenue
Operating Margin
Fundamental Analysis & Valuation
%
Operating profit as a percentage of revenue, showing what the core business keeps before interest and tax.
Operating Margin = Operating Profit (EBIT) / Revenue x 100