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A leverage effect will occur if: a. fixed operating costs are greater than zero or if interest expense is less than zero b. fixed operating costs are greater than zero or if interest expense is greater than zero c. fixed operating costs are less than zero or if interest expense is greater than zero d. fixed operating costs are less than zero or if interest expense is less than zero

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Answer:

B. fixed operating costs are greater than zero or if interest expense is greater than zero

Explanation: The "leverage effect" refers to the well-established relationship between stock returns and both implied and realized volatility: volatility increases when the stock price falls.

The leverage effect explains a company's Return on Equity in terms of its Return on Capital employed and Cost of debt. The leverage effect is the difference between Return on Equity and Return on Capital employed.

Leverage refers to the debt that is the borrows funds. Yet are made to enhance returns from an investment or a project. Companies use leverage to finance their assets. Such as issuing stocks or rising capital.

  • Leverage can take place if the company has a fixed stock that must be met with the sales volume.
  • As leverage can increase the volatility of the stock. Increasing the levels of risks can in turn increase the returns.

Hence the option b is correct.

Learn more about the leverage effect that will occur.

https://brainly.com/question/23611168.

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