Revenue sensitivity to profit.

Operating leverage measures how sensitive EBIT is to revenue changes. Degree of Operating Leverage (DOL) = contribution margin ÷ EBIT. High DOL (4x+): small revenue swings produce large profit swings. Low DOL (1-2x): stable profit even with revenue fluctuation. Software and subscription businesses typically have high DOL; services businesses low.

10M revenue, 40% contribution margin (4M), 1M EBIT. DOL = 4. A 10% revenue increase drives 40% EBIT increase (10% × 4). A 10% revenue drop cuts EBIT 40%. High leverage amplifies both directions. Knowing DOL helps CFOs plan for volatile conditions.

Fixed cost ratio drives DOL. Airlines, software, media have very high fixed costs - once planes/servers are paid, incremental revenue flows nearly 100% to profit. Food service, retail have variable costs that scale with volume - less dramatic leverage but more resilient in downturns. Strategy decision: high-DOL businesses should hold more cash reserves for downturn protection.

Run it with sensible defaults

Using revenue change of 10%, current revenue of 10,000,000, current ebit of 1,000,000, fixed costs of 3,000,000, the calculation works out to 4.00x. Nudge the inputs toward your own situation and the output recalculates instantly. The defaults are meant as a starting point, not a recommendation.

The levers in this calculation

The inputs — Revenue Change %, Current Revenue, Current EBIT, Fixed Costs, and Contribution Margin % — do not pull with equal force. Not every input has equal weight. Flip one at a time toward extreme values to feel which ones move the needle most for your situation.

How the math works

Contribution = revenue × contribution margin %. DOL = contribution ÷ EBIT. Revenue change × DOL = EBIT % change. The working is transparent — you can verify every step yourself in the formula section below. No black box, no opaque "proprietary model".

Using this as a check-in

Re-run this every three months. A single reading tells you where you stand; four readings tell you whether things are improving. The trend matters more than any individual snapshot.

What this doesn't capture

The score is a composite of the inputs you provide. Life context — job security, family obligations, health, housing — doesn't appear in the math but shapes the real picture. Use the number as a prompt, not a verdict.