The probability that a firm will become bankrupt is largely dependent on its level of both business risk and financial risk.

Question

Quizplus · Accepted Answer

Business risk and financial risk are two major factors that affect a firm's probability of becoming bankrupt. Business risk refers to the uncertainty and variability of a firm's operating income, while financial risk refers to the firm's ability to meet its financial obligations. Both these risks contribute to the overall risk profile of the firm and increase the likelihood of bankruptcy if not managed properly. Therefore, the statement is true.

The Probability That a Firm Will Become Bankrupt Is Largely