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Thought Question

Thought Question - decisions Sales Volume Variability...

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* Thought Question Why does the typical physician  work so many hours? Answer in a few minutes…    * Business (aka Operating) Risk:       Variability or uncertainty  associated with operating income  (i.e. EBIT).  Note:  Specific industry  influences  business risk. * Financial Risk:       Risk of distress or  bankruptcy due to the use of fixed  cost financing. 
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Note:  Management  influences the  financial risk with VC vs. FC 
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Unformatted text preview: decisions. * Sales Volume Variability * Competition * Cost Variability * Product Diversification * Product Demand * Operating Leverage The use of fixed operating costs as opposed to variable operating costs. A firm with relatively HIGH fixed operating costs will experience MORE variable operating income if sales change. Fixed Costs = Operating Leverage = Business Risk...
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