Explain difference between business risk and financial risk, Financial Management

Assignment Help:

What is the difference between business risk and financial risk?

Business risk considers to the uncertainty a company has regarding to its operating income (as well termed as earnings before interest and taxes or EBIT).  Business risk is brought on through sales volatility and intensified by the existence of fixed operating costs.

The term financial risk is the additional volatility of net income caused by the existence of interest expense.  Firms that have just equity financing have no financial risk because they have no debt on which to make fixed interest payments. Alternatively, firms that operate primarily on borrowed money are exposed to a high degree of financial risk.


Related Discussions:- Explain difference between business risk and financial risk

What is accumulated depreciation?, What is accumulated depreciation? De...

What is accumulated depreciation? Depreciation is the provision of an asset's initial cost over time.  Accumulated depreciation is the sum of all the depreciation expense that

What is gatt, What is GATT, and what is its goal? GATT is the General A...

What is GATT, and what is its goal? GATT is the General Agreement on Tariffs and Trade it is a agreement that seeks to decrease trade barriers among participant nations.

How to calculate the future value of an annuity, Calculate the Future Value...

Calculate the Future Value of an Annuity: Annuity is stated as periodic payment every period for a number of periods. This periodic payment is the same each year only then it c

Bond indexation, Bond indexation serves the purpose of replicating th...

Bond indexation serves the purpose of replicating the performance of a predetermined benchmark as closely as possible. These benchmarks are generally very broader

Dividend policy, the managing directors of three profitable listed companie...

the managing directors of three profitable listed companies discussed their company''''s dividend policies. company A has deliberately paid no dividends for the past five years. co

What is the trade payable days, What is the Trade payable days (turnover) ...

What is the Trade payable days (turnover) Year-end trade payables/Credit purchases (or cost of sales)x   365days This is the length of time taken to pay suppliers. The rat

Is depreciation the loss of value of fixed assets, Is depreciation the loss...

Is depreciation the loss of value of fixed assets No. An operative (and not a pseudo-philosophical) explanation of depreciation might be: it is a number that allows us to save

Prosthetic components in implantology, Implants and implant systems since i...

Implants and implant systems since inception have been in continuous state of flux in terms of its design and surface. Likewise there has been a subtle change in the implant surgic

Define the wave of mergers in the banking industry, What is behind the wave...

What is behind the wave of mergers in the banking industry? A: Various economic factors have caused banking institutions to merge over the past various years. These factors inclu

Project on investment banking house, The Project to be Addressed by the Pap...

The Project to be Addressed by the Paper: You have just graduated from CCI's MBA program and have secured a position as a fund manager for a well known investment banking house

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd