Business risk
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
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
