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    Business Risks and Financial Risks

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    Why do companies in different industries often have different levels of risk?

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    According to Brigham and Houston (2007), there are two new dimensions of risk:
    (1) Business risk, which is the riskiness of the firm's assets if it uses no debt.
    (2) Financial risk, which is the additional risk placed on the common stockholders as a result of using debt (p. ...

    Solution Summary

    Business operation is a risky business. A business owner must accept a level of risk such as it may not succeed and not recover the investment. There are two significant risks factors: business risk and financial risk. This solution discusses both.