It is possible for Firms A and B to have identical financial and operating leverage,yet for Firm A to have more risk as measured by the variability of EPS.This would occur if Firm A has more business risk than Firm B.

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If Firm A's sales are more volatile than those of Firm B,then A would have greater EPS variability in spite of identical financial and operating leverage.Operating leverage is only one factor that affects business risk.

It Is Possible for Firms a and B to Have