In this tutorial, we'll go over the finer details of Operating Leverage, including its meaning, formula and step-by-step calculations. After that, we will use the Colgate Case Study to compute Operating Leverage and interpret the results. You can download the Colgate Operating Leverage template from this link - https://www.wallstreetmojo.com/ratio-analysis-template/What is Operating Leverage?--------------------------------------------Operating leverage is an accounting metric that assists analysts in analyzing how a company's operations are related to its revenues. Moreover, the ratio details how much of an increase in operating profit the company will have with a specific percentage increase in sales – emphasizing the predictability of sales.Formula--------------------------------------------Degree of Operating Leverage Formula = % change in EBIT / % change in Sales.Interpretation--------------------------------------------- Lower Operating Leverage means higher variable costs and lower fixed costs. In this situation, abusiness must generate a minimum level of sales to pay its fixed costs. It can earn additional profit in terms of Selling Price minus Variable Cost until it achieves the break-even point, where all of its fixed costs are covered.- Lower variable expenses and higher fixed costs are associated with higher operating leverage. Thebreak-even point will be higher in this case since the fixed costs are higher. The benefit is that once the break-even point is reached, the company will be able to earn a greater profit on each product because the variable cost is low.For more details, you can refer to our article - https://www.wallstreetmojo.com/operating-leverage/Connect with us!YouTube https://www.youtube.com/channel/UChlNXSK2tC9SJ2Fhhb2kOUwLinkedIn https://www.linkedin.com/company/wallstreetmojo/mycompany/Facebook https://www.facebook.com/wallstreetmojoInstagram https://www.instagram.com/wallstreetmojoofficial/?utm_medium=copy_linkTwitter https://twitter.com/wallstreetmojo