term commonly used in finance and accounting to describe the ability of fixed costs to magnify returns to a firm's owners. OPERATING LEVERAGE, a measure of operating risk, refers to the fixed operating costs found in the firm's income statement. FINANCIAL LEVERAGE, a measure of financial risk, refers to financing a portion of the firm's assets, bearing fixed financing charges in hopes of increasing the return to its owners. Total leverage is a measure of total risk. The way to measure total leverage is to determine how EARNINGS PER SHARE (EPS) is affected by a change in sales.