Are my answers right? what is the answer for 2?

The total risk in a firm is determined by evaluating the firm's business risk and financial risk. True or False: All other things being equal, firms exhibiting high degrees of operating leverage exhibit lower levels of business risk This statement is: True False The use of financial leverage, or fixed-cost sources of capital, involves a trade-off between its effect on the firm's shareholders and its effect on the riskiness of the firm. Read each statement below, and indicate whether Statement 1, Statement 2, or both statements are correct, or neither statement is correct. Statement 1 In general, the more business risk that a firm experiences, the more financial leverage the firm will want to employ in its capital structure. Which response is correct? o Only Statement 2 is correct. Both statements are correct. Only Statement 1 is correct. Neither statement is correct. Statement 2 When its earnings are decreasing, the use of greater levels of debt capital in a firm's capital structure magnifies the negative return earned by the firm's shareholders beyond that earned by the shareholders of an otherwise identical unlevered firm. As an analyst, Olivia is comparing two nearly identical manufacturing firms: Purple Panda Manufacturing Company and Orange Snail Production Inc. It is your job to evaluate the relative business and financial risks of Purple Panda and Orange Snail. The two firms possess the same value of total assets, and earn identical levels of expected operating profit (as measured by the firms' earnings before interest and taxes, or EBIT), but they differ in two critical characteristics: their amount of total debt and the standard deviation of their expected EBIT. The following table describes several of Purple Panda's and Orange Snail's major attributes: 3 Total assets Total debt Expected EBIT Standard deviation of expected EBIT Purple Panda Orange Snail Manufacturing Inc. Production Inc. $5,200,000 $5,200,000 $2,600,000 $1,040,000 $1,248,000 $1,248,000 $348,400 $223,600 Use the given financial data to indicate which firm has the higher degree of each type of risk. Which firm has more financial risk? Which firm has more business risk? O Orange Snail Purple Panda Orange Snail Purple Panda