--%>
Assignment Help - homework help

Describe difference between business risk and financial risk

Describe difference between business risk and financial risk?
Business risk refers to the uncertainty company hold regarding to its operating income (also termed as earnings before interest & taxes or EBIT). Business risk is brought onto sales volatility & intensified through the existence of fixed operating costs.
Financial risk is the added volatility of net income caused by the presence of interest expense. Firms which have only equity financing have no financial risk because they have no debt on which to make fixed interest payments. On the other hand, firms which operate primarily on borrowed money are exposed to a high degree of financial risk.

   Related Questions in Finance Basics

  • Q : How cash and capital budget relate to

    Describe how the cash budget and the capital budget associate to proforma financial statements.The cash budget illustrates the projected flow of cash in and out of the firm for particular time periods. The capital budget illustrates planned expe

    		•
  • Q : Define Employee Compensation or

    Employee Compensation or Retirement: Salary, advantage, employer retirement rate contribution adjustments, and any other associated statewide compensation adjustments for the state employees. Different 9800 Items of the Budget Act suitable funds for c

    		•
  • Q : Advantages-disadvantages of internal

    Describe advantages and disadvantages of the internal rate of return method? The internal rate of return method is discounted cash flow method and number expressed like a percentage. Typically these are seen as advantages. The main disadvantag

    		•
  • Q : Equilibrium GDP for this hypothetical

    Normal 0 false false

  • Q : Mergers encourage the formation of new

    Do mergers encourage the formation of new banks? Yes. The increase in the number of new banks in the second half of the 1990s coincides with a surge in merger activity in the similar period. A study conducted through the Federal Reserve Bank of

    		•
  • Q : What is a Category Category: A grouping

    Category: A grouping of related kinds of expenditures, like Personal Services, Reimbursements, Operating Expenses and Equipment, Special Items of Expense, Un-classified, Local Costs, Capital Costs, and inner Cost Recovery.

    		•
  • Q : For banking services how competitive is

    For banking services how competitive is the market?Along with more than 7,000 banks and thrifts in the U.S., banking is one of the most competitive industries in the world. Assume the following characteristics of the American financial services

    		•
  • Q : Explain Generally Accepted Accounting

    Generally Accepted Accounting Principles (GAAP): The accounting rules, principles, conventions, and procedures which are employed for accounting and financial reporting. The GAAP for governments are put by the Governmental Accounting Standards Board (

    		•
  • Q : Financial crisis during 1997-1998

    Describe the Financial crisis during the time period of 1997-1998 ?

    		•
  • Q : What is Fed prime goal in setting

    Normal 0 false false