I agree with your definition and analysis of operating leverage as a measure of costs in an organization. Operating leverage can also be defined as the degree in which a company incurs various fixed and variable costs in the production process with respect to top revenue growth. It analyzes the risk attached to a firm's operating income. For example, firms with high operating leverage have high percentage of fixed costs with respect to total costs translating to more sales to fill the cost gap. Firms with low operating leverage sell fewer units to effectively cover the high variable cost. The cost structure of a company determines the output in operating leverage. High fixed costs increase the degree of operating leverage while high variable costs decrease the output in aspects of operating leverage. A company with high leverage translates to a negative business: it is dependent on more volumes and units of sales to cover fixed costs expenses and become profitable. Lower operating leverage in a company does not translate to increased profits or gains even as high volumes are moved since variable costs increase with increase in production units.
High operating leverage can be beneficial in some circumstances; for instance, firms can generate more income from each additional unit sold costs do not increase with the increase of production. Profit margins widen due to the relatively fixed asset cost and standards operational expenses. However, in turbulent times, high operating leverage becomes a financial misery to a company. Changes in consumer trends and economic environment especially when the return on investment fails to exceed loan interest, therefore, cutting down the company's return on equity and its profit score. When firms make small volumes of sales with wider profit margins, they potentially risk their future forecasts in aspects of operating ability and consequently expose their earnings in attempts of breaking even. Finally, becoming highly leveraged to God translates to full provision of physical, financial, psycho-emotional and other life aspects to effectively yield a purposeful life and yield God's kingdom.
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