What does operating leverage measure?

In business, the term "leverage" refers to the amount of
debt that a firm has.  The term refers to the idea that the firm is using the debt as a
lever to allow it to use a little debt to make large
profits.

Operating leverage is a measure of how much of a
firm's costs are fixed, as opposed to variable.  A firm has higher operating leverage if
many of its costs are fixed.  Fixed costs are costs like machinery--things that cost a
certain amount, regardless of how much product a firm produces.  A firm with high
operating leverage is in a relatively good position because any increases in its level
of production bring it more profits because so many of its costs are
fixed.

Please follow the link below for an excellent
in-depth discussion of this topic that uses examples.