Operational gearing

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May 24, 2021 at 4:27 pm #621651
Syed Ahsan Ali
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Is it true that Operational gearing is used to measure the business risk of the company?

It can be calculated as (Contribution / Profit before Interest & Tax)?

What exactly are we looking for using this formula?
May 25, 2021 at 7:45 am #621686
John Moffat
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No. Operating gearing is one factor that affects the riskiness of a business.

As to what we are looking at, please watch my free lecture working through Chapter 13 of our free lectures notes.
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