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Firms Business Risks

Which of the following statements is most correct?

a. A firms business risk is solely determined by the financial characteristics of its industry.
b. The factors that affect a firms business risk are determined partly by industry characteristics and partly by economic conditions. Unfortunately, these and other factors that affect a firms business risk are not subject to any degree of managerial control.
c. One of the benefits to a firm of being at or near its target capital structure is that financial flexibility becomes much less important.
d. The firms financial risk may have both market risk and diversifiable risk components.
e. None of the statements above is correct.

Solution Preview

a. This is not correct - business risk is not determined by financial characteristics but by economic ...

Solution Summary

The solution explains the correct alternative from the given choices