Using fixed operational expenses in the cost structure of the company is known as operating leverage. Any percentage change in sales will cause an even higher percentage change in EBIT (earning before interest and taxes) when operational leverage is present.
Operating leverage is a cost-accounting formula that measures the degree to which a firm or project can increase operating income by increasing revenue. A business that generates sales with a high gross margin and low variable costs has high operating leverage.
Online retailers sometimes have high variable costs, particularly for goods, and minimal fixed expenses. Retailers sell a lot of products and receive payment in advance for each unit they sell, therefore COGS rises as sales rise. These stores frequently have limited operational leverage as a result.
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