Answer (A) is correct . Business risk is the risk of fluctuations in earnings before interest and taxes or in operating income when the firm uses no debt. It depends on factors such as demand variability, sales price variability, input price variability, and the amount of operating leverage. Financial leverage affects financial risk and is not a factor affecting business risk.
Answer (B) is incorrect because Sales price variability is a factor affecting business risk.
Answer (C) is incorrect because Demand variability is a factor affecting business risk.
Answer (D) is incorrect because Input price variability is a factor affecting business risk.
|
