What is meant by 'Operating Leverage' and 'Financial Leverage'?

Operating leverage and financial leverage are two crucial concepts in the management of power distribution, as they play a significant role in determining the financial performance and risk of power distribution companies. Both these levers help in analyzing the impact of cost structures and financing choices on profitability.

Operating Leverage

Operating leverage refers to the extent to which a company's operating income is affected by a change in revenue, primarily due to fixed costs in the cost structure. It is a measure of how revenue growth translates into changes in operating profit. A company with high fixed costs relative to variable __________ _________ _________ ____ ______ ___ ______ __________ _________ ___ __________ _________.
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