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

Why iceq go beyond icq, ICEQ'sgo beyond ICQ's Discover whether erro...

ICEQ'sgo beyond ICQ's Discover whether error or fraud is possible. Concentrates on significant frauds or errors which might be possible and so only a handful of key con

Determine the operating cash flow, Determine the operating cash flow: ...

Determine the operating cash flow: E4-1 The installed cost of a new computerized controller was $65,000. Calculate the depreciation schedule by year assuming a recovery period

Application of shareholder value maximization framework, Application of Sha...

Application of Shareholder Value Maximization Framework   Factors affecting Shareholder's Value are: Capital Market Conditions Profitability à Includes factors li

Capital structure decisions: the basics, i want some presentation slides of...

i want some presentation slides of this chapter from page 570 to 580

Bond indenture, Bond Indenture An indenture builds the formal conditio...

Bond Indenture An indenture builds the formal conditions of a lending relationship between a borrower and a lender. It is a written record, and it outlines most important func

The chinese pension fund system, The Chinese Pension Fund System Mainlan...

The Chinese Pension Fund System Mainland China has a rapidly aging population. This is attributable to two main factors - the one-child policy plus substantial improvements in l

What are the difficulties of capital budgeting, Q. What are the Difficultie...

Q. What are the Difficulties of Capital Budgeting? 1. Measurement Problems: - Identifying as well as measuring the costs and benefits of a capital expenditure proposals tend to

International bonds, International bonds are divided into two c...

International bonds are divided into two categories namely, foreign bonds and euro bonds. Foreign bonds are issued by a borrowing company in another

Criticize the flexible exchange rate regime, Criticize the flexible exchang...

Criticize the flexible exchange rate regime from the viewpoint of the proponents of the fixed exchange rate regime. If exchange rates are fluctuating very frequently, that may

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