Definition of positive jaws
A company with high fixed costs (costs that don't vary with sales) is said to have high operational gearing. The implication is that if sales increase by a small amount, there will be a disproportionate increase in profits. Conversely, if sales fall by a small amount, there will be a disproportionately large decrease in profit. Sales volume is very important to companies with high fixed costs. Banks can theoretically increase profits significantly by doing a high volume of new business from the same cost base. The two-pronged approach of doing lots of new business and reducing costs should magnify this effect ie it creates 'positive jaws'.
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