Which of the following statements regarding financial risk and business risk is true? A) The acceptable level of financial risk for a firm depends on its business risk. B) A firm with a greater degree of business risk has the ability to take on more debt. C) A firm with a greater degree of financial risk typically takes on less business risk. D) Financial risk and business risk are both important but they are not related in any way. E) Financial risk is more important for small firms and business risk is more important for large firms.

Question

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The acceptable level of financial risk for a firm depends on its business risk. This means that a firm's level of financial risk should be aligned with its level of business risk to ensure a balanced and sustainable financial position. A firm with a higher level of business risk may not be able to handle as much financial risk as a firm with a lower level of business risk.

Which of the Following Statements Regarding Financial Risk and Business