Degree of Operating Leverage

Definition: A measure of how sensitive a company's operating income is to changes in sales revenue. DOL = % Change in EBIT ÷ % Change in Sales. Higher DOL mean…

A measure of how sensitive a company's operating income is to changes in sales revenue. DOL = % Change in EBIT ÷ % Change in Sales. Higher DOL means fixed costs make up a larger proportion of total costs, amplifying profit swings.