What is meant by business risk?

Business risk refers to the inherent uncertainty associated with a company's potential to generate profits and sustain operations over time. This encompasses the variations in revenue and expenses that can occur due to a range of factors, such as changes in market conditions, consumer preferences, and operational efficiency.

When considering the option that describes business risk correctly, it is essential to understand that this risk exists even in a scenario where leverage—borrowed funds used to increase potential returns—is not utilized. The focus here is on the fundamental operations of the business itself and how various internal and external factors can influence its profitability.

In contrast, the other choices address specific types of risk rather than the broader definition of business risk. For instance, changes in interest rates pertain to financial risk rather than the operational uncertainty inherent in the business activities. Additionally, competition affects strategic positioning and market share but does not encapsulate the comprehensive risk profile that business risk covers. Lastly, regulatory fines represent a legal risk rather than the overall uncertainty in profit generation stemming from operational factors. Thus, the option that highlights the uncertainty of profit and loss in business operations without leverage accurately captures the essence of business risk.