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The total systematic risk of a firm’s equity has two parts. What are they

The total systematic risk of a firm’s equity has two parts. What are they

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Answer : The total systematic risk of a firm’s equity has two parts. i.e Financial Risk and Business Risk.

Financial Risk is related to capital structure of the company . Ti refers to whether the organisation is able to manage its debt . This type of Risk is detremined by the organisation financial policy.

Business risk is related to operations of organisation . It evaluates whether the company is generating sufficient Income or not as to be able to meet its expenses.

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