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

What are the operating and financing decisions of any firm, A firm's operat...

A firm's operating and financing decisions   Risk also results from decisions made within the company.  This risk is usually divided into two classes:  - Business risk is th

Short terms working capital, Q. Short terms working capital? 1) Indige...

Q. Short terms working capital? 1) Indigenous bankers: private money leased and other country banking used to be the only source of finance prior to the establishment of the

Role of government in the financial markets, Role of Government in the Fina...

Role of Government in the Financial Markets Many countries felt that the government should regulate certain aspects of the financial markets. Based on the history and culture o

Formulation of collection policy, Q. Formulation of Collection Policy ? ...

Q. Formulation of Collection Policy ? Formulation of Collection Policy:- The third characteristic of the receivable management is to formulate a collection policy. Collection p

Determine marginal tax rate, Q. Determine marginal tax rate? Ans. ...

Q. Determine marginal tax rate? Ans. Henkel does not carry debt beyond five years. To determine the cost of debt: a. For Henkel AG, which Treasury rate at which maturit

What are the predator shareholders, What are the Predator shareholders ...

What are the Predator shareholders Predator company's shareholders mayn't approve the bid for various reasons. Reduction in EPS If consideration is

Bond, Bond - One type of long-term PROMISSORY NOTE, often issued to the pub...

Bond - One type of long-term PROMISSORY NOTE, often issued to the public as a SECURITY regulated under federal securities laws or state BLUE SKY LAWS. Bonds can eitherbe registered

Corporate governance features, Corporate Governance features Corporat...

Corporate Governance features Corporate compliance: The BOD should make sure that corporation obeys with all related laws, governance practices, regulations, accounting an

The value of the quick ratio, Dev's Spa has cash of $50, accounts receivabl...

Dev's Spa has cash of $50, accounts receivable of $60, accounts payable of $200, inventory of $150 and accured expenses of $100. What will be the value of the quick ratio?

What is return oncapital employed - performance ratios, What is Performanc...

What is Performance ratios ROCE Return oncapital employed (ROCE)= (Profit before interest and tax (PBIT) / Capital employed) * 100% ROCE measures profitability and illu

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