Combined Leverage is the product of operating lf finance. As it is the product of Financial leverage and Operating leverage, companies should be reluctant to increase Financial leverage if the Operating leverage is already high. Conversely, companies with low Operating leverage (and therefore operating a stable business) can afford to be more highly geared.

(See Chapter 36 Returning cash to shareholders of the Vernimmen)

To know more about it, look at what we have already written on this subject