Business risk is a positive function of the systematic risk of a ﬁrm's assets.

Question

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Business risk is the risk inherent in a company's operations and is measured by the variability of its operating income. Systematic risk, often referred to as market risk, is the risk that cannot be diversified away and is associated with factors that affect the overall market, such as economic conditions, geopolitical events, and interest rates. As such, the systematic risk of a firm's assets is a factor that contributes to its business risk.

Business Risk Is a Positive Function of the Systematic Risk