- CFA Exams
- CFA Level I Exam
- Study Session 11. Corporate Finance (2)
- Reading 34. Measures of Leverage
- Subject 1. Business Risk and Operating Leverage
CFA Practice Question
If two companies have identical operating risk, they also have identical ______.
A. business risk
B. sensitivity of operating earnings to changes in the number of units produced and sold
C. total leverage
User Contributed Comments 3
| User | Comment |
|---|---|
| jackwez | Why not A? |
| janecb1 | Business Risk determined by both sales risk and operating leverage. |
| gordonp87 | janecb1, that is not correct. B is correct, but so is A. Business risk is the risk of the firm's assets when no debt is used. Operating risk is exactly the same thing. I think this question meant to say "if two companies have identical OPERATIONAL risk." Operational risk is not quite the same thing. |