avoid operating losses. At low margins of safety, managers are less likely to take advantage of opportunities that, if incorrectly analyzed or forecasted, could send the company into a loss position. Operating Leverage Another measure that is closely related to the MS and provides useful management information is the company’s degree of operating leverage. The relationship between a company’s variable and fixed costs is reflected in its operating leverage. Typically, highly labor-intensive organizations have high variable cost and low fixed cost; these organizations have low operating leverage. (An exception to this rule is a sports team, which is highly labor intensive, but its labor cost is fixed rather than