This can be viewed as an opportunity and also a risk, it combines two components in business ie operating leverage and financial leverage. Operating leverage is a component in business that produces high sales with low operating costs and high operating leverage.
Financial leverage the best way to describe it is “An example of financial leverage is buying a rental property. If the investor only puts 20% down, they borrow the remaining 80% of the cost to acquire the property from a lender. Then, the investor attempts to rent the property out, using rental income to pay the principal and debt due each month. If the investor can cover its obligation by the income it receives, it has successfully utilized leverage to gain personal resources (i.e., ownership of the house) and potential residual income.” ref https://www.investopedia.com/
Where does this leverage come from?
this results from the fixed expenses a business occurs during operation ie rent, depreciation, interest on debt, insurance, and wages. In normal operating scenarios companies that have more fixed costs relative to variable costs in their cost structure have greater leverage and hence more risk as net income fluctuates more with revenue