What can be concluded about a firm with high business risk?

A firm with high business risk is characterized by its exposure to various uncertainties that can significantly impact its operational performance and profitability. This heightened level of risk implies that the firm is more susceptible to fluctuations in sales and may encounter volatile revenue streams as a result of factors such as market competition, changes in consumer preferences, or economic conditions.

Therefore, the conclusion that it faces a higher chance of experiencing losses is accurate. High business risk means that the firm’s revenues can vary widely, which increases the likelihood of not only lower-than-expected profits but also outright losses during downturns or adverse market conditions.

In contrast, firms with low business risk typically operate in more stable environments, resulting in more predictable revenues and a lesser chance of incurring losses. Essentially, high business risk indicates greater uncertainty about future performance, which inherently carries a greater risk of negative financial outcomes.