Business risk is that portion of a firm’s unsystematic risk that is caused by the prevailing environment of the business. Put another way, business risk is a function of operating conditions being faced by a firm. These risks influence the operating income of a firm and consequently the potential of the firm to pay dividends to shareholders.
Business risks can be internal or external to the firm. Internal business risk is associated with the internal environment of the firm. These include factors such as fluctuations in sales, research and development, personnel, fixed cost and more. External business risks are associated with circumstances beyond a firm’s control. Each firm must deal with specific external factors that may be unique and peculiar to its industry. Some possible external risks are fluctuations in the economy, demographic changes, shifts in government policies, regulation and taxes, and similar.
According to the text, “Every business enterprise will have its own unique attributes and risks, which can be incorporated into the rate of return.” Using the company that you chose and wrote about last week, discuss the unique attributes and risks specific to that company, expounding upon how those factors may impact its required rate of return.
DISCUSSION ASSIGNMENT INSTRUCTIONS
required to submit a thread of at least 450 words in response to the provided prompt for each
forum. For each thread, you must support your assertions with at least two (2)
scholarly/professional sources (note that Investopedia and Wikipedia are not
scholarly/professional sources). Your sources MUST be cited at the end of your post using
proper APA format.
In addition to your original thread, you must reply to at least two (2) classmates’ threads. Each
reply must be at least 250 words. Do not just say “good job” or “I learned something from your
post.” Replies are not a cheering exercise. Instead, your replies must be substantial, reflecting
what you learned from reading the post, offering an extension, or correcting a mistake. Use what
you learned in researching for your post (or knowledge gained from other classes or personal
experience) to either supplement or critique the post you are writing about. You do not have to
include any references for your replies.
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