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* There are 2 factors that determine the sensitivity of a firm's earnings to business conditions. Business Risk which represents sales sensitivity to business condition (some industries are robust while others are not), financial leverage with the division between fixed and variable costs (firms with greater amounts of fixed cost relative to the variable cost are subject less to business fluctuations, thus profits are more stable) O and secondly financial Risk which represents the degree in using operating leverage (the amount of interest .payment) while leverage firm is more sensitive to business cycles Financial Risk which represents sales sensitivity to business condition (some industries are robust while others are not), operating leverage with the division between fixed and variable costs (firms with greater amounts of variable cost relative to the fixed cost are subject less to business fluctuations, thus profits are more volatile) O and secondly Business Risk which represents the degree in using financial leverage (the amount of interest payment) while leverage firm is less sensitive to business cycles Financial Risk which represents the degree in using financial leverage (the amount of interest payment) while leverage firm is more sensitive to business cycles and secondly business Risk which represents sales sensitivity to business condition (some industries are robust while others are not), operating leverage with the division between fixed and variable costs (firms with greater amounts of variable cost relative to the fixed cost are subject less to business fluctuations, thus profits are more stable) * There are 2 factors that determine the sensitivity of a firm's earnings to business conditions. Business Risk which represents sales sensitivity to business condition (some industries are robust while others are not), financial leverage with the division between fixed and variable costs (firms with greater amounts of fixed cost relative to the variable cost are subject less to business fluctuations, thus profits are more stable) O and secondly financial Risk which represents the degree in using operating leverage (the amount of interest .payment) while leverage firm is more sensitive to business cycles Financial Risk which represents sales sensitivity to business condition (some industries are robust while others are not), operating leverage with the division between fixed and variable costs (firms with greater amounts of variable cost relative to the fixed cost are subject less to business fluctuations, thus profits are more volatile) O and secondly Business Risk which represents the degree in using financial leverage (the amount of interest payment) while leverage firm is less sensitive to business cycles Financial Risk which represents the degree in using financial leverage (the amount of interest payment) while leverage firm is more sensitive to business cycles and secondly business Risk which represents sales sensitivity to business condition (some industries are robust while others are not), operating leverage with the division between fixed and variable costs (firms with greater amounts of variable cost relative to the fixed cost are subject less to business fluctuations, thus profits are more stable)