Increasing the operating or business risk of a firm will increase the variability of:
A) return on equity (ROE).
B) return on investment (ROI).
C) increasing the operating or business risk of the firm has no effect on the variability of ROE and ROI.
D) a and b

Question

Quizplus · Accepted Answer

Increasing the operating or business risk of a firm will increase the variability of both return on equity (ROE) and return on investment (ROI). This is because higher risk can lead to higher returns, but it can also result in larger losses. As a result, the variability of ROE and ROI will increase.

Increasing the Operating or Business Risk of a Firm Will