The risk caused by variations in income before taxes over time because fixed interest expenses do not change when operating income rises or falls is called:
A) interest rate risk
B) business risk
C) financial risk
D) purchasing power risk

Question

Quizplus · Accepted Answer

Financial risk refers to the risk caused by variations in income before taxes over time because fixed interest expenses do not change when operating income rises or falls. This can lead to a situation where a company may not be able to meet its debt obligations, resulting in default or bankruptcy.

The Risk Caused by Variations in Income Before Taxes Over