Which of the following statements regarding risk,or the avoidance of risk,is correct?
A)A firm's business risk is determined solely by the financial characteristics of its industry.
B)Risk due to industry characteristics is beyond the control of the firm's management.
C)One of the benefits to a firm of being at or near its target capital structure is that this eliminates any risk of bankruptcy.
D)A firm's financial risk can be minimized by diversification.

Question

Quizplus · Accepted Answer

Risk due to industry characteristics, such as demand variability, input cost variability, and the degree of competition, is generally beyond the direct control of a firm's management. These external factors are part of the business environment in which a firm operates.

Which of the Following Statements Regarding Risk,or the Avoidance of Risk,is