Operating leverage and financial leverage differences

[Giselle Knowles]

I am in need of your help. I am requiring knowing the factors of difference between operating leverage and financial leverage. I also want to know one thing that, how we can measure both the leverage? If anyone is any idea related with this topic, then try to help me out. Any help regarding this will be appreciated. Please do help. Thanks.

[Chandranath]

I have some idea about this so i would like to tell you that, operating leverage is used to calculate the difference in the income, in case if the quantity of productivity or sale is changed by one unit on the other hand the financial leverage is the sum of change in returns if there is a change in the funds that had been borrowed to form the belongings. Operating leverage can be calculated by the change in earnings before interest and tax while degree of Operational Leverage can be calculated by the change in earning per share divided by the percentage change in the income before interest and tax. Hope have helped you.

[Abhibhava]

I think that, both the operating and the financial leverage outcome in the enlargement of the changes to earnings due to the existence of predetermined costs in a company's cost composition. The only difference I would like to tell you that, operating leverage is the enlargement on the top half of the income statement and the Financial leverage is the enlargement on the bottom half of the income statement.

[Giselle Knowles]

Thanks for the instance reply. I have referred you posts and i founded them as really helpful to me. The difference Operating leverage and financial leverage which you have provided here were really good one. So i would like to thank you both for spending your precious time in giving me the reply and also for helping me out.