Two firms, although they operate in different industries, have the same expected earnings per share and the same standard deviation of expected EPS.Thus, the two firms must have the same business risk.

Question

Quizplus · Accepted Answer

While expected EPS and standard deviation of expected EPS are factors to consider when evaluating business risk, they alone do not provide a complete picture of a firm's risk. Other factors, such as the nature of the industry, financial leverage, and market conditions, can significantly impact a firm's risk level. Therefore, two firms with the same expected EPS and standard deviation of expected EPS can still have different levels of business risk.

Two Firms, Although They Operate in Different Industries, Have the Same