Describe financial risk or business risk

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For each of the following scenarios, explain whether the situation describes financial risk or business risk. Explain your answer!

a. A pharmaceutical company has developed a new cancer treatment drug with a much higher success rate than other drugs currently in the market. It has the potential to triple the company's profits. However, the FDA has expressed concern about some side effects, and it is not clear if the FDA will approve the drug.

b. An airline has an EBIT of $100 million per year. However, it also has a tremendous amount of debt and pays $97 million per year in interest. Its EBIT is relatively stable but tends to go up or down by $5 million or so each year, depending on the economy.

c. A basketball franchise earns an EBIT of $50 million a year when its team has a winning year. However, it earns only $10 million when its team has a losing year.

Reference no: EM133114920

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