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

Average of relatives method, Average of Relatives Method We have seen ...

Average of Relatives Method We have seen the construction of an index number using the aggregates method. In this section, we shall see the construction of an index using the

Explain and compare the costs of hedging, Explain and compare the costs of ...

Explain and compare the costs of hedging via the forward contract and the options contract. Answer: There is no up-front cost of hedging through forward contracts. Though, in t

Brief introduction of asset backed security, An asset-backed security is a ...

An asset-backed security is a type of bond or note that is based on a pool of assets, or collateralized by the cash flows from a specified pool of underlying assets. As

Primary market, Primary Market In an economy, at a given point of time, ...

Primary Market In an economy, at a given point of time, there will be people/entities called savers the surplus units, whose current income exceeds their current expenditure whi

Calculate amount of first coupon payment your organization, Your firm has p...

Your firm has presently issued five year floating-rate notes indexed to six-month U.S. dollar LIBOR plus 1/4%.  What is the amount of first coupon payment your organization will pa

Harmonisation of accounting standards, Harmonisation of Accounting Standard...

Harmonisation of Accounting Standards Recognising the required for international harmonisation of accounting standards, in year 1973, the International Accounting Standards Co

What do you mean by pension funds, What do you mean by pension funds? ...

What do you mean by pension funds? Pension funds: Pension funds give retirement income (as the form of annuities) to workers covered through a pension plan. They get cont

Explain medium term expenditure framework, Question 1: The various crit...

Question 1: The various criteria for evaluating a revenue measure or system are: ? Yield ? Political expediency ? Consistency with economic and social goals ?

Operating cycle, applicability of an operating cycle in vegetable growing b...

applicability of an operating cycle in vegetable growing business

What is investment decision, Q. What is Investment Decision ? Investmen...

Q. What is Investment Decision ? Investment Decision: - Investment decision as well known as 'Capital Budgeting' is related to the selection of long-term assets or projects in

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