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

Defien contractual savings institutions, Contractual savings institutions ...

Contractual savings institutions Contractual savings institutions obtain funds at periodic intervals on a contractual basis. The industry is classified into two main groups ins

Perfectly competitive market, What level of profits can you earn in a perfe...

What level of profits can you earn in a perfectly competitive market and what drives markets towards perfect competition over the long run?

Explain the term dividend cover, Dividend cover Dividend cover measure...

Dividend cover Dividend cover measures the relationship among earnings per share and net dividends per share. The higher the altitude of dividends for any given level of EPS t

Cost of capital, The Nu-Nu Brothers Inc. (NNBI) has the following capital s...

The Nu-Nu Brothers Inc. (NNBI) has the following capital structure, which it considers to be optional: Debt 25% Preferred Stock 15% Common Equity 60% NNBI''''s expected net income

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

Role of special purpose vehicle, The financial institutions tha...

The financial institutions that originate the loans sell a pool of cashflow-producing assets to a specially created third party that is called a

Stock valuation, I just purchased a stock that would pay the dividends of t...

I just purchased a stock that would pay the dividends of the first four years as D1 = $0.65, D2 = $0.74, D3 = $0.79, D4 = $0.84. I also told that the dividends would grow continual

Case study, credit limit decision bajaj electronics company

credit limit decision bajaj electronics company

Hurdles in implementation of securitization, The following are considered t...

The following are considered the major stumbling blocks: The process becomes expensive because of the stamp duty payable. It also

I need urgent help in Financial Managment, How to get cost differential whe...

How to get cost differential when 100% done by a single party only.

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