Define: Operating Gearing

UK Accounting Glossary

Definition: Operating Gearing


Quick Summary


The ratio of fixed operating costs to variable operating costs.



What is the dictionary definition of Operating Gearing?

Dictionary Definition



Full Definition


Operational gearing (also known as operating leverage) describes the relationship between a company’s fixed costs (costs that it has to pay, regardless of how many sales it makes) and variable costs (those that rise and fall along with the level of turnover).

The higher a firm’s fixed costs are as a proportion of total costs, the higher its operational gearing.