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THE COMBINED EVALUATION OF THE OPERATING RISK AND OF THE FINANCIAL RISK

Daniel Circiumaru (), Marian Siminica () and Radu Criveanu
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Radu Criveanu: University of Craiova Faculty of Economics and Business Administration, Craiova

Revista Tinerilor Economisti (The Young Economists Journal), 2007, vol. 1, issue 9S, 143-147

Abstract: While performing its current activity, a company can face two types of risks: the operating risk and the financial risk. The combined effect of these risks obviously influences the shareholders’ earnings. In order to quantify this effect, we have used the degree of combined leverage, calculated in two ways, by taking into account the net result of the company and the economic value added. In order to better point out the size of the combined risk, we have made the graphical representation of the degree of combined leverage as a function of the operating result. Using this chart, we have made analyses regarding the dynamic of the combined risk for different intervals of evolutions of the operating result.

Keywords: operating risk; financial risk; degree of combined leverage; economic value added (search for similar items in EconPapers)
JEL-codes: G00 G20 (search for similar items in EconPapers)
Date: 2007
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