Author(s): Abdelrahim M. Kadomi
The possibility of making a profit is mostly linked with risk of losses. High management levels need to understand the risks involved sufficient skills to invest and to utilize knowledge in a good manner. Operating leverage is highest in companies that have a high proportion of fixed operating costs in relation to its variable. Companies with high operating leverage can make more money from each additional sale if they don't have to increase the variable costs when producing more sales. Operating leverage is a measure of how revenue growth translates into operating profit within risky, or volatile operating and financial leverage. Financial Leverage is the strategy of using borrowed money to increase Due Pont return on assets. A sample of (21) industrial companies of Amman Stock manufacturing sector have been analyzed via simple regression has concluded the followings: (a) no significant statistical impact of operating leverage upon assets turn over the one component of Due Pont System return on asset. (b) The financial leverage is with a negative statistical significant impact on net profit margin as the second Due Pont component. It is well-known that both types of Leverage affects the firm risk as it can magnify earnings both up and down.