Which of the following statements is CORRECT?
A. A firm's business risk is determined solely by the financial characteristics of its industry.
B. The factors that affect a firm's business risk include industry characteristics and economic conditions, both of which are generally beyond the firm's control.
C. One of the benefits to a firm of being at or near its target capital structure is that this generally minimizes the risk of bankruptcy.
D. A firm's financial risk can be minimized by diversification.
E. The amount of debt in its capital structure can under no circumstances affect a company's EBIT and business risk.
Answer: B
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