what is Influence of Business Risk on a firm's Capital Structure Decisions?

Question

financial management

Answer 1

Conceptualize the connection between capital and risk, and understand the difference between regulatory and economic capital.
Companies need to set aside equity capital as a cushion against worst-case losses in their business activities. Clearly, the level of risk taken should relate to capital: more risk = more capital. (Pls refer to the 1st link for an excellent site on risk and capital)

For the paper on LEASING RISK, FINANCING RISK AND CAPITAL STRUCTURE DECISIONS pls refer to the 2nd link.

The analysis examines the choice of the capital structure in terms of return and risk, and the associated tradeoffs faced by a risk-averse firm. The starting point of the discussion is to view the total risk of the firm as consisting of two distinct parts, business risk and financial risk. (Pls refer to the 3rd link)