Explain difference between business risk and financial risk, Financial Management

Assignment Help:

What is the difference between business risk and financial risk?

Business risk refers to the improbability a company has with regard to its operating income also known as earnings before interest and taxes or EBIT.  Business risk is carried on by sales volatility and intensified by the presence of fixed operating costs.

Financial risk is the further volatility of net income origin by the presence of interest expense.  Firms that have merely equity financing have no financial risk for the reason that they have no debt on which to make fixed interest payments. On the other hand, firms that operate primarily on borrowed money are bare to a high degree of financial risk.

 


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

Advantages and disadvantages of closed end country funds, Discuss the advan...

Discuss the advantages and disadvantages of closed-end country funds or CECFs relative to the American Depository Receipts or ADRs as a means of international diversification. An

Explain the determinants of operating exposure, Explain the determinants of...

Explain the determinants of operating exposure. Answer:  The main determinants of a company’s operating exposure are (a) The structure of the markets where the company sourc

Stream of expected returns, Stream of Expected Returns Investment retur...

Stream of Expected Returns Investment returns can take many forms. An investor must consider all these forms to evaluate an investment option accurately. A brief description of

Common size financial statement, Common Size Financial Statement Common...

Common Size Financial Statement Common Size Financial Statement is a company financial statement that shows all items as percentages of a common base figure. This kind of finan

Prepare monetary statements using accounting standards, Entity A is signifi...

Entity A is significantly smaller than B in terms of revenue and would not impact LOP's revenue to the same extent. However A earns a noticeably better gross profit margin at 26% a

Beta, what is the value of beta for this fund ? If the benchmark index for ...

what is the value of beta for this fund ? If the benchmark index for this mutual fund increased by 11.00% during the period covered by beta measure, what was the rate of return for

Legal obligations of corporation is the cost of equity zero, If dividends p...

If dividends paid to common stockholders are not legal obligations of a corporation, is the cost of equity zero? Explain your answer. Even though common stockholders don't have

Prepare a report for the managing director, The Managing Director of your f...

The Managing Director of your firm is thinking aloud about an appropriate gearing level for the company: "The consultants I spoke to yesterday explained that some academic th

Calculate the investment in a project, BAGS, Inc. is considering an investm...

BAGS, Inc. is considering an investment in a new project. The required investment is $1,000,000. After-tax net cash flows are expected to be $50,000 the first year and are expected

Tests in investments, Tests in Investments There are many rules that sp...

Tests in Investments There are many rules that specify how the past data of share prices can be used to obtain a clue regarding the future prices of shares. Such rules would be

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