Although they operate in different industries, two firms 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

The two firms may have different business risks even if they have the same expected EPS and standard deviation of EPS. Business risk takes into account factors such as industry competitiveness, regulatory environment, and management quality, among others. These factors can vary across industries and across firms within the same industry, leading to different levels of business risk.

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