FIN 375 Week 5 Participation Discussion Question 2

Each week three graded discussion questions are available for student responses. Each DQ is worth 20 points. You can do original posts or reply to other student posts.

Operating Leverage, as discussed in the week five online lecture, focuses on the relationship of variable costs to sales. High operating leverage companies are those whose variable costs are a small percentage of sales. A small increase in sales results in a very large increase in profits.

What types of companies or industries might be high operating leverage companies? What are some examples?

What is the benefit of high operating leverage?