The risk cause 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)tax risk
D)purchasing power risk
E)none of the above

Question

Quizplus · Accepted Answer

The risk described is known as financial risk, which is not listed among the options. It arises from the use of fixed-cost financing, such as debt, which can amplify the effects of changes in operating income on net income.

The Risk Cause by Variations in Income Before Taxes Over