The additional risk a firm's common shareholders must bear when a firm uses fixed cost financing is best described as:

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21-12-2021
Business

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The additional risk a firm's common shareholders must bear when a firm uses fixed cost financing is best described as:

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Tundexi Tundexi · Answer 1 · 2021-12-31T15:02:22+01:00

A firm's financial risk refers to the additional risk that the firm's common shareholders must bear when a firm uses fixed cost financing.

Basically, a financial risk refers to ant types of risk associated with financing in a firm.

Shareholders can be affected adversely when the firm mismanage its finance and shares bought with them because their share capital and dividend will be stalled.

In conclusion, the firm's financial risk refers to the additional risk that the firm's common shareholders must bear when a firm uses fixed cost financing.