[amp_mcq option1=”Business Risk” option2=”Financing Risk” option3=”Production Risk” option4=”Credit Risk” correct=”option1″]<\/p>\n
The correct answer is: A. Business Risk<\/strong><\/p>\n Operating leverage is a measure of how a firm’s operating costs react to changes in sales. A firm with high operating leverage has a high proportion of fixed costs, which means that a small change in sales can lead to a large change in profits. A firm with low operating leverage has a low proportion of fixed costs, which means that a small change in sales can lead to a small change in profits.<\/p>\n Business risk is the risk that a firm will not be able to generate enough cash flow to meet its obligations. Business risk is affected by a number of factors, including the firm’s industry, its product mix, its pricing strategy, and its cost structure.<\/p>\n Financing risk is the risk that a firm will not be able to meet its financial obligations. Financing risk is affected by a number of factors, including the firm’s debt-to-equity ratio, its interest rate structure, and its cash flow.<\/p>\n Production risk is the risk that a firm will not be able to produce its products at the desired level of quality or quantity. Production risk is affected by a number of factors, including the firm’s manufacturing process, its quality control procedures, and its supply chain.<\/p>\n Credit risk is the risk that a borrower will not be able to repay its loan. Credit risk is affected by a number of factors, including the borrower’s financial condition, its debt-to-equity ratio, and its interest rate structure.<\/p>\n Operating leverage is a measure of business risk, not financing risk, production risk, or credit risk.<\/p>\n","protected":false},"excerpt":{"rendered":" [amp_mcq option1=”Business Risk” option2=”Financing Risk” option3=”Production Risk” option4=”Credit Risk” correct=”option1″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[945],"tags":[],"class_list":["post-42884","post","type-post","status-publish","format-standard","hentry","category-financial-management","no-featured-image-padding"],"yoast_head":"\n