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

Cost of capital, Provide an argument for including or not current liabiliti...

Provide an argument for including or not current liabilities in the cost of capital calculation.

Value index numbers, Value Index Numbers The value index number as desc...

Value Index Numbers The value index number as described earlier is a combination index which combines price and quantity changes. Because of the difficulties experienced in pri

Define why it is difficult to forecast future exchange rates, Researchers f...

Researchers found that it is extremely difficult to forecast the future exchange rates more precisely than the forward exchange rate or the current spot exchange rate. How would yo

Financial Planning, report on Financial Planning and Forecasting

report on Financial Planning and Forecasting

What are agency problems, What are agency problems? and between what two st...

What are agency problems? and between what two stakeholders do agency problem typically occur?

Price Earnings, what is the relationship between industry pe and comapny''s...

what is the relationship between industry pe and comapny''s pe?

Swing traders, Swing Traders Swing trading is more or less similar to d...

Swing Traders Swing trading is more or less similar to day trading except that swing traders will normally have a longer holding period during a working day. Swing traders also

Determine the basic requirements for a successful jit, What are the basic r...

What are the basic requirements for a successful JIT inventory control system? For a JIT system to be booming the supplier must be willing and capable to deliver materials instan

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