Because of fixed costs, net operating income does not change in proportion to changes in the level of activity which is called the: leverage effect.
What is the leverage effect?
This is the term that helps to tell us the effect that the debt has on the return that is on equity. When there is additional debt, this would end up having to increase the debt equity on the owner.
Leverage has to do with the borrowing of funds in order to make purchase with the futuristic value of the good would be used to offset the debt that they have accrued.
Read more on leverage effect here: https://brainly.com/question/16201965
#SPJ4
