Achieving Operational Deleverage: FMCG and Pharma Companies’ Success During the Pandemic

Operating leverage refers to the proportion of a company’s cost structure that consists of fixed costs rather than variable costs. Fixed costs are expenses that remain relatively constant regardless of sales performance or production volume, such as rent for office space. Variable costs, on the other hand, fluctuate based on sales performance, such as delivery or shipping fees. Companies with higher operating leverage have a larger proportion of fixed costs that remain unchanged under different production volumes. This means that as sales increase, the impact on profits is amplified, resulting in higher profitability. However, if sales decline, the fixed costs can become a burden and reduce profit margins. <a href="https://shrijapathak.medium.com/achieving-operational-deleverage-fmcg-and-pharma-companies-success-during-the-pandemic-6fa8f47433">Website</a>