Operating Leverage: This type of leverage arises from the use of fixed costs in the company's operations. High operating leverage means that a larger proportion of the company's costs are fixed, which can magnify the impact of changes in sales on its earnings before interest and taxes (EBIT). Financial Leverage: This type of leverage results from the use of debt financing. High financial leverage means a company has a significant amount of debt relative to its equity, which can increase the potential return on equity but also heighten the risk of financial distress.