Re: difference between operating leverage and financial leverage -
June 27th, 2015
Difference can be easily identified by their definition.So, here is the definition of operating leverage and financial leverage.
Meaning and Definition of operating leverage
Operating leverage is a measure of how revenue growth translates into growth in operating income. It is a measure of leverage, and of how risky, or volatile, a company's operating income is.
Meaning and Definition of financial leverage
Financial leverage refers to the use of debt to acquire additional assets. Financial leverage is also known as trading on equity. Below are two examples to illustrate the use of financial leverage, or simply leverage. Mary uses $400,000 of her cash to purchase 40 acres of land with a total cost of $400,000.