__________ arises from decisions that affect the left-hand side of the balance sheet, while ________________ arises from decisions that affect the right-hand side of the balance sheet.
A) Systematic risk; ﬁnancial risk.
B) Business risk; ﬁnancial risk.
C) Unsystematic risk; systematic risk.
D) Business risk; diversiﬁable risk.
E) Systematic risk; unsystematic risk.

Question

Quizplus · Accepted Answer

Business risk arises from decisions that affect the left-hand side of the balance sheet, such as operational and strategic decisions that impact the company's revenues, expenses, and assets. Financial risk, on the other hand, arises from decisions that affect the right-hand side of the balance sheet, such as financing and capital structure decisions that impact the company's liabilities and equity. Therefore, option B is the correct answer.

__________ Arises from Decisions That Affect the Left-Hand Side of the Balance