Business Risk - EPS versus EBIT
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Are any of the following correct?
1. Suppose Company A's EPS is expected to experience a larger % of change in sales than Company B's EPS. Other things held constant, Company A would appear to have more business risk than Company B?
2. Statement 1 would be correct if the term EBIT were substituted for EPS
3. Statement 1 would be correct if the term EBIT were substituted for "Sales"
4. Statment 1 would be correct if the words "financial risk" were substituted for "business risk"
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Solution Summary
This solution explains the concept of business risk.
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