Business risk is concerned with the operations of the firm.Which of the following is not associated with (or not a part of)business risk?
A) Demand variability.
B) Sales price variability.
C) The extent to which operating costs are fixed.
D) Changes in required returns due to financing decisions.
E) The ability to change prices as costs change.

Question

Quizplus · Accepted Answer

Changes in required returns due to financing decisions are related to financial risk, rather than business risk. Business risk is primarily concerned with uncertainties related to operations, such as demand and sales price variability and the extent to which operating costs are fixed. The ability to change prices as costs change is also considered a part of business risk.

Business Risk Is Concerned with the Operations of the Firm