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