The business risk of a company: Multiple Choice

A. is dependent upon the relative weights of the debt and equity used to finance the company.

B. has a positive relationship with the company's cost of equity.

C. depends on the company's level of unsystematic risk.

D. has no relationship with the required return on a company's assets according to M&M theory.

E. is inversely related to the required return on the company's assets.

Question

Karen Green

Business

5 January, 11:43

The business risk of a company: Multiple Choice

A. is dependent upon the relative weights of the debt and equity used to finance the company.

B. has a positive relationship with the company's cost of equity.

C. depends on the company's level of unsystematic risk.

D. has no relationship with the required return on a company's assets according to M&M theory.

E. is inversely related to the required return on the company's assets.

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Answers (1)

Know the Answer?

Ryan Curtis · Answer 1

The correct answer to the following question is option B) it has a positive relationship with the company's cost of equity.

Explanation:

Business risk can be defined as a risk which is capable of threatening a company's ability to achieve its goals or lower the company profits. This risk can be associated with overall operations of a company. This type of risk can arise from with in the company or even from external factors. This risk has a positive relationship with the company's cost of equity.