Operating Leverage - how and where is it used in the curriculum

CFA Level II
#1

I get different definitions for Operating Leverage. Could some one please clarify. In which topic is it useful. For example, Equity - Operating leverage is referred to in Porter’s Five forces under Degree of Rivalry among Existing competitors. Is it used in FSA as well? under what context?

#2

Operating leverage is the percentage of fixed cost in a company’s cost structure. I don’t think it is used in FSA…

#3

Hi ClementVC. Thanks for the clarification. That makes sense. Somewhere in the book, I vaguely remember reading that Operating Leverage and Operating Margin are one and the same. EBIT / Sales. I guess I was wrong.

#4

I just remember that in the mocks they include operating leverage in ROE dupont analysis… don’t let them trick you dude… it is totally different than financial leverage (total asset/equity)

#5

It is not in this year’s LOS.