What is the difference between business risk and financial risk? Explain some of the factors that...

Question

Question

What is the difference between business risk and financial risk? Explain some of the factors that contribute to each. Evaluate Moore Plumbing Supply’s level of business risk.

Answer 1

Answer #1

Risk is the chance or probability of occurring a loss.It is the potential for uncontrolled loss of something of value.

Risk can be classified into Business risk and Financial risk.

Difference

Business risk	financial risk
It is the uncertainty if unexpected return on an asset if the company does not use the debt.	It is the uncertainty of return if the company takes the debt.
It is related to the total profit of the business.	It is related to the financial profit of the business.
It relates to the operating leverage	It relates to the financial leverage
Owners and creditors are concerned with this risk and they can control this risk,.	Owners of the business are concerned with this risk and only owners can control it.
Unavoidable risk	Avoidable risk
Types of business risk are compliance risk,reputation risk,strategic risk etc	Types of financial risk are credit risk,market risk,liquidity risk etc

Factors affecting Business risk :

Factors affecting Financial risk :

Answer 2

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