Operating Leverage Calculator

About this calculator

The degree of operating leverage (DOL) measures how sensitive a company's operating income (EBIT) is to a change in sales, calculated as the contribution margin (sales minus variable costs) divided by EBIT (or equivalently, %change in EBIT ÷ %change in sales). A high DOL means a business has a lot of fixed costs relative to variable costs, so small swings in revenue produce amplified swings in operating profit — both up in good times and down in bad ones.

CFOs, financial analysts and business owners use operating leverage to understand risk and forecast earnings volatility: capital-intensive businesses like airlines, manufacturers and software companies (high fixed costs, low variable costs) tend to have high DOL, while service businesses with mostly variable labor costs have low DOL. Enter sales, variable costs and fixed costs to see the DOL and gauge how much a sales change would move operating income.