1. Cost-volume-profit (CVP) analysis is a way to find out how changes in variable and fixed costs affect a firm's profit. Companies can use CVP to see how many units they need to sell to break even (cover all costs) or reach a certain minimum profit margin.
2. A low percentage of margin of safety might cause a business to cut expenses, while a high spread of margin assures a company that it is protected from sales variability.
3. Since the financial leverage is a fixed cost, it increases the sensitivity of profits in the business cycle. Firms with higher fixed costs have higher operating leverage as smaller changes in business conditions hugely impact its profitability.