What is financial risk?

Question

BlackTom AI · Accepted Answer

To approach this question, we first consider the concept of financial risk and what it specifically relates to in corporate finance.
Option a: 'Risk from external market conditions' describes market risk or systematic risk, which affects the value of assets due to factors like interest rates, exchange rates, or economic cycles, not the financing structure itself. Therefore, this is not the definition of financial risk.
Option b: 'Risk from how the company is financed' directly points to financial risk, which arises from the choices a firm makes about its funding—from debt levels to equity structure—and the potential for financial distress if cash flows are insufficient to meet obligations.
Option c: 'Risk from regular business operations' corresponds to operating risk, which stems from the day-to-day activities of producing goods or services, not from financing decisions. This is separate from financial risk.
Option d: 'Risk from changes in government policies' would be considered regulatory or political risk, involving potential impacts from policy shifts, taxes, or sanctions, not the financial structure of the company.
Thus, each of the other options identifies a different category of risk, while option b uniquely matches the definition of financial risk by focusing on financing decisions and their consequences.

What is financial risk?单项选择题

类似问题

Jordana is a travel agent. Whenever she sells an expensive vacation package, she encourages the customer to buy travel insurance, which provides reimbursement in case of trip cancellation due to illness or another emergency. Jordana is trying to reduce her customers' __________ risk.

"Leverage increases risk. Risk involves..." (fill in the blank)

Credit risk and interest rate risk cannot affect insolvency risk.

Credit risk and interest rate risk cannot affect insolvency risk.

When evaluating a new project, firms should include in the projected cash flows all of the following EXCEPT:

Provide the best rationale for what's wrong with supply chains today?

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单