Good try! Operating leverage results when fixed operating costs are present in the firms cost structure. High operating leverage means that the firm has high fixed costs. Low operating leverage means that the firm has low fixed costs. It should be noted here that fixed operating costs do not include interest charges incurred from the firms use of debt financing. The degree of operating leverage measures the responsiveness of a firms EBIT to fluctuating sales levels. This can be measured by comparing the percentage change in EBIT to the percentage change in sales. I did want to ask you what company is more sensitive to the business cycle, a capital intensive or labor intensive?