O Capital Structure and Leverage: Business and Financial Risk -Select- risk is the single most important determinant of capital structure, and it is the riskiness inherent in the o another and also among firms in a given industry. In addition, it can also change over time. A commonly used measure of -Select- risk is the standard deviation of the firm's return on invested capital (RO structure, so the standard deviation of ROIC measures the underlying risk of the firm Select-3 considering the eft including: competition, demand variability, sales price variability, input cost variability, product obsolescence, foreig a- which is defined as the extent to which fixed costs are used in a firm's operations. These fac Select- managerial decisions. Cselect is the extent to which fixed-income securities (debt and preferred stock) are used in a firm's ca risk, over and above the firm's basic Select- risk, resulting from the use of Select leverage. The use of deb using debt increases the expected rate of return for an investment. However, debt also increases risk to the commons increases risk. When a firm is determining its optimal capital structure, it needs to balance these positive and negative Give the correct response to the following questions Company X has a higher degree of financial risk than Company Y. Company can offset this by lowering its operating i -Select- Firm A has more business risk than Firm 8, but they both have the same total risk. Which of the following statements m a. In order to offset its higher business risk, Firm A will increase its operating leverage so that its total risk is the same a b. Because Firm A has more business risk than Firm B, its debt ratio will be greater than Firm B's. c. Because Firm B has less business risk than Firm A, its debt ratio will be lower than Firm A