Which of the Following Statements Is CORRECT

question 31

Multiple Choice

Which of the following statements is CORRECT?

• A)A firm's business risk is determined solely by the financial characteristics of its industry.
• B)The factors that affect a firm's business risk are affected by industry characteristics and economic conditions.Unfortunately, these factors are generally 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.
• E)The amount of debt in its capital structure can under no circumstances affect a company's business risk.

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Definitions:

Market Prospects

The potential for future sales growth or business expansion based on current market trends, consumer behavior, and economic conditions.

Positive Market Expectations

The anticipation or belief among investors and consumers that the market will grow or perform well in the future.

Profitability

The ability of a company to generate profit from its operations over time, typically measured by various financial metrics.

Comparative Financial Statement

Financial statements that present information for more than one period, facilitating the analysis of trends over time.