Many investors don't understand the term "operating leverage" when they're starting out. But trust me, the smartest investors do. In this article, I'll attempt to demonstrate what operating leverage is, using the home rental platform Airbnb (NASDAQ: ABNB) as an example.

Smart investors know that Airbnb possesses a business model with inherent operating leverage built in. And it's one of the reasons it should be near the top of any investor's watch list.

It's surprising to some newer investors that profitability can be measured from multiple angles. When assessing a business model, looking at the operating margin can be helpful. The net-profit margin also includes things like taxes and financing arrangements. These items are important, but they aren't directly related to operating the business.

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Source Fool.com