Business risk

From CNM Wiki
Jump to: navigation, search

Business risk is the risk inherent in the operations of the firm, prior to the financing decision. Thus, business risk is the uncertainty inherent in future operating income (also known as earnings before interest and taxes). Business risk is caused by many factors; two of the most important are sales variability and operating leverage.


Definitions

According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),

Business risk. The risk inherent in the operations of the firm, prior to the financing decision. Thus, business risk is the uncertainty inherent in future operating income or earnings before interest and taxes. Business risk is caused by many factors; two of the most important are sales variability and operating leverage.

According to Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition),

Business risk. The riskiness inherent in the firm's operations if it uses no debt.

Related concepts

Related lectures