Respuesta :
The Profit Leverage Effect is the idea that lowering the amount spent on organization purchasing activities improves profit more quickly than growth in revenue brought on by marketing and sales.
Profit leverage effect implies that a dollar saved on purchases always has organization a greater impact on profit than a dollar increase in sales.
Leverage effect measurements seek to quantify the level of business risk that a specific organization is currently facing. Business risk is the potential variation in revenue that a company may experience as well as the Profit Leverage Effect sensitivity of net income to revenue fluctuations. Leverage effect metrics are designed to illustrate how a company's fixed and movable expenses might affect profitability when revenues shift. We'll examine the operational leverage effect (OLE), financial leverage effect (FLE), and total leverage effect (TLE) ratios in this post.
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