Volume : I, Issue : VII, April - 2012

Business Risk And Financial Risk – Indian Corporate Sector

Dr. M. Dhanabhakyam, P. Balasubramanian

Abstract :

In todays competitive business scenario, the task of framing appropriate strategy is important to stabilize a firms earnings (business risk) and add value to firms owners (financial risk). Business risk is defined as representing the risks to the companys operating results. Financial risk is the risk inherent in the company’s choice of financing structure. The concept of financial risk can be combined with the business risk profile, in order to develop logical alternative financial strategies for different type of business. Combining together a high business risk strategy gives a very high total risk profile. This paper attempts to analyze the business and financial risk of Indian corporate sector (3 different industries – 15 selected companies from BSE 100) during post liberalization period specifically from fiscal year 1999 to 2009. This paper uses co–variation and Ratio analysis as a primary method to determine the business and financial risk. The paper evaluates the interdependence of business risk and financial risk and analyzes the theoretical concept – "higher the risk higher the return". Further, the paper checks for uniformity amongst capital productivity risk, cost structure and liquidity risk. Finally, the study tries to answer the following questions – How the capital structure affects the earning capacity of selected industries? Which portfolio of capital structure provides lowest business risk?  

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Article: Download PDF   DOI : 10.36106/ijar  

Cite This Article:

Dr. M. Dhanabhakyam, P. Balasubramanian Business Risk And Financial Risk - Indian Corporate Sector Indian Journal of Applied Research, Vol.I, Issue.VII April 2012

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