Firms whose revenues are strongly cyclical and whose operating leverage is high are likely to have:
A) low betas.
B) high betas.
C) zero betas.
D) negative betas.

Question

Quizplus · Accepted Answer

Firms with high operating leverage and cyclical revenues are more sensitive to economic cycles, leading to higher volatility in their stock prices compared to the market. This results in high betas, indicating a strong correlation with market movements.

Firms Whose Revenues Are Strongly Cyclical and Whose Operating Leverage