What is the best determination of business risk Course Hero?
What is the best determination of business risk? THE CORRECT ANSWERVariability of EBITWHAT YOU NEED TO KNOWBusiness riskis the possibility that a company will have lower-than-anticipated operating income. The most common definition of business risk is the variability of earnings before interest and taxes (EBIT).
How business risk measured by leverage?
In brief, the financial leverage ratio measures the amount of debt held by the business firm that they use to finance their operations. … We can also say that it measures the financial risk of the business firm. The formula is: Financial Leverage = Operating income/Net income.
How are business risk and financial risk measured by the leverage?
Also known as the financial leverage multiplier, this measurement of risk in financial management measures the amount of a firm’s assets that are financed by its shareholders. It compares total assets with total shareholders’ equity to show the percentage of assets that are financed by equity shares.
Which company’s stock is likely to have the highest beta Course Hero?
Which company’s stock is likely to have the highest beta? THE CORRECT ANSWER Halifax Airlines Long-term debt: 60,000 Total long-term capital: 80,000 — Montana Bikes expands by making several investments.
Which firm has the highest operating leverage?
Operating leverage can be calculated as fixed costs over total costs (fixed costs plus variable costs):For the firms:Western Paper120,000 / 200,000 = 0.6Applied Devices50,000 / 200,000 = 0.25Omni Group15,000 / 50,000 = 0.3Western Paper has the highest operating leverage and is the most vulnerable to a downturn in …
Which company’s cash flow to debt ratio has the highest financial risk?
Other things being equal, Kodiak Airlines has the highest financial risk because it has the lowest cash flow relative to its debt. National Electric has the highest cash flow to debt and thus the lowest financial risk.
What are examples of business risks?
The term business risks refers to the possibility of a commercial business making inadequate profits (or even losses) due to uncertainties – for example: changes in tastes, changing preferences of consumers, strikes, increased competition, changes in government policy, obsolescence etc.
What is the measure of business risk called?
The measure of business risk is operating leverage. Operating leverage is a cost-accounting formula that measures the degree to which a firm or project can increase operating income by increasing revenue.