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what does Operating gearing (contribution/profit before interest and tax) mean?
How to interpret this results? what does Operating gearing 950% mean?This is more from FM only a little bit in PM
Operating gearing, calculated as the contribution divided by the profit before interest and tax (EBIT), is a measure of a company’s fixed cost structure in relation to its variable costs.
It indicates how a company’s operating income will respond to changes in sales volume.
A high operating gearing means that a company has a high proportion of fixed costs relative to its variable costs, which implies that changes in sales volume will have a more significant impact on the company’s operating profit.
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