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

Calculate the amount invested in treasury bonds, You have an investment cap...

You have an investment capital of $1,000,000.  You plan to invest a portion of this money in Treasury bonds and the remainder in a stock portfolio.  Treasury bonds are expected to

Interpretations of market based ratio''s, Market based Ratio's   PE:...

Market based Ratio's   PE:           The Price-to-Earnings ratio is calculated by market price per share to earnings per share and is expressed in terms of times. It shows h

IFM, 38. The optimum capital structure is the one with i) highest value of ...

38. The optimum capital structure is the one with i) highest value of the firm ii) Lowest value of the firm iii) highest shares in numbers iv) highest debt

Business organization, what business organization do you preffer ? service ...

what business organization do you preffer ? service concern,trading concern or manufacturing concern

Operating leverage, Operating Leverage Operating leverage define the de...

Operating Leverage Operating leverage define the degree to which an organization cost of operation is fixed as opposed to variable. Therefore, it is a measure of how much a fir

Calculations and graphing cumulative returns, Monthly Returns: You now nee...

Monthly Returns: You now need to calculate the monthly "periodic" returns for all three stocks and the S&P index.  Adapting the holding period return formula (End - Beg) / Beg for

Profit maximization-objectives of a business entity, Profit maximization ...

Profit maximization Traditionally, this was considered to be the major goal of the firm. Profit maximization refers to attaining the maximum possible profits throughout the yea

Price-yield relationship of a callable bond, Price-Yield Relationship of a ...

Price-Yield Relationship of a Callable Bond The price-yield relationship of a non-callable or a non-puttable bond is convex because price and yield are inversely proportional.

Working capital management, Q. Working capital management? Every busine...

Q. Working capital management? Every business needs funds for the two purposes for its establishments and to carry out day to day operations. Long terms funds are required to c

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