SIMON BROWN: The leverage effect

In theory, making a profit is simple: sell whatever you make for more than it costs to produce. Reality is more complex, however, as part of the cost of production will be found in costs that are not directly linked to the manufacturing of your product, such as head office, marketing and the like. 

There is another aspect to business — the leverage effect — that is important to understand. Basically, this is when a company has a largely fixed cost base but variable income from what it produces. ..

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