MANAGEMENT

Detailed explanation-1: -read more by the EBIT of the company, which is mathematically represented as, Formula = Contribution margin / EBIT. It can be further expanded as shown below, Degree of Operating Leverage Formula = (Sales – Variable cost) / (Sales – Fixed cost – Variable cost)

Detailed explanation-2: -Contribution. Contribution Margin is a measure of operating leverage: the higher the contribution margin is (the lower variable costs are as a percentage of total costs), the faster the profits increase with sales.

Detailed explanation-3: -Financial leverage depicts the amount of the debt used to acquire additional assets. It is the proportion of debt present in the total Capital Structure. The formula for Financial leverage is EBIT/ EBT.

Detailed explanation-4: -The formulas for the two necessary inputs are listed below: Contribution Margin (%) = (Revenue – Variable Costs) ÷ Revenue. Operating Margin (%) = (Revenue – Variable Costs – Fixed Costs) ÷ Revenue.