Higher interest rates can negatively impact businesses

Higher interest rates can negatively impact businesses since their interest expense may increase. Business risk can occur because of various factors. One factor is sales price changes. Firms which sell products in volatile markets face more business risk that companies which face less volatile prices. Another factor that impacts business risk is changes in demand. If the demand for a firm’s product is quite volatile, the firm will face more business risk that a company which has a product with consistent demand. Also, a firm that experiences substantial foreign exchange risk due substantial exchange rate volatility from international sales faces more business risk than a company which just sells its products domestically. Would you estimate that Bank of America faces a lot of business risk? Why or why not?

 

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