The possibility that a business may not be able to repay a bank loan because of an economic downturn is referred to as
A) materiality risk.
B) information risk.
C) interest rate risk.
D) business risk.

Question

Quizplus · Accepted Answer

Business risk refers to the possibility that a business may not generate sufficient cash flows to repay its debts. This risk is affected by the economic conditions that the business operates in, including changes in the market, competitive pressures, and regulatory changes. If an economic downturn were to occur, businesses in many industries may struggle to meet their financial obligations, including the repayment of bank loans.

The Possibility That a Business May Not Be Able to Repay