Make more money from each additional credit sale
Operating leverage is the idea that companies can make more money from each additional sale if they do not have to increase fixed costs to produce more. In general, operating leverage refers to the fact that a lower ratio of variable cost per unit to price per unit causes profit to vary more with a change in the level of output than it would if this ratio was higher. So operating leverage is a function of fixed unit costs and output. The benefits of operating leverage unfold when business picks up. Then the existing workforce, plant and equipment can produce more without additional costs. Profit margins expand, and profits boom. Obviously, the profit of a business with a high degree of operating leverage varies more, everything else remaining the same, than do those profits of businesses with less operating leverage.
Greater variability of profits, of course, means that the credit risk is higher. Conversely, with a lower level of operating leverage, the business shows poor growth in profits as sales rise, but faces a lower risk of loss as sales decline.