The higher the coefficient of variation of possible operating income values:
A) the lower the financial risk of the firm.
B) the greater the financial risk of the firm.
C) the greater the operating leverage of the firm.
D) the greater the business risk of the firm.

Question

Quizplus · Accepted Answer

The coefficient of variation of possible operating income values is a measure of the relative variability of operating income, which is directly related to business risk. A higher coefficient indicates more variability in operating income, thus indicating greater business risk.

The Higher the Coefficient of Variation of Possible Operating Income