Business risk is verysimilar to the risk of bankruptcy and is closely linked to

Business risk is verysimilar to the risk of bankruptcy and is closely linked to theamount of debt in a firms financing mix. Financial risk is associatedwith the returns earned by equity investors. Business risk is oftenmeasured by the variability of earnings before depreciation andtaxes and is closely associated with the risk inherent in the goodsand services a business is selling. Investment risk is theuncertainty associated with a firms investment projects. It can bethought of as the likelihood that the expected IRR or NPV from aninvestment project will not materialize.