course hero which of the following increases financial risk?

What are the different types of financial risk?

Various types of financial risk are given below: 1. Market Risk Market risk arises out of upgrades or innovation in technology, change in prices or change in consumption patterns of customers affecting business revenues. Market risk includes systematic and unsystematic risk resulting in a loss of investment.

How to manage financial risk?

Financial Risk can be managed by maintaining a balance between equity and debt as well as using debt for growth of business for better returns. Business risk can be managed by managing the operation process, reduction in the cost of productions, technical upgrades, and new strategies. Following are the advantages and disadvantages below:

What is the difference between financial risk and business risk?

In the case of Business and government, financial risk is the inability to pay off its debt. Business risk generally related to inefficiency in operations. Financial Risk can be caused due to the high burden of debt instead of equity with the intention to generate better returns.

What is the importance of risk in business?

Growth: Risk is an important part of the business and for growth and expansion in a new market; businesses might need to raise finance through debt. Financial Risk although it looks burden for the company, if a company is able to perform and generate better revenues through growth and expansion such risk needs to be taken.

What happens to human capital as wealth increases?

c) As your financial wealth increases, your human capital remains unchanged over your lifespan.

What is financial literacy?

Financial literacy refers to:#N#a) How well you manage the financial stressors in your life.# N#b) How well you understand and use personal finance information.#N#c) How well you score on standardized measures of personal finance.#N#d) Your maximum score on a comprehensive consumer finance test.

What is the effect of spending more money on food and exercise?

a) Healthy people spend more money on food and exercise which reduces their lifetime wealth accumulation.

What is business financial risk?

Business financial risk may occur due to problems in operations of the business, credit risk i.e. inability to pay off debt, market risk i.e. when business losses its customers due to upgrades, innovations by competitors, change in consuming patterns. For government financial risk means the inability to control inflation, ...

Why did mortgages take risk in bulk?

As a result, many financial institutions took risky mortgages in bulk from buyers with poor credit history known as mortgage-backed securities.

How does defaulting affect business?

The inability of a borrower to repay the debt according to contractual obligations. Defaulting in repayment of debt will affect business reputation in the market, the ability to borrow funds from other financial institutions and loss of investor’s confidence. While in case of government credit risk can have vast effects on the entire economy and world, since defaulting bonds and inability to control inflation will affect countries’ reputation, business transaction, social stability and relations with other countries.

How does defaulting bonds affect the economy?

While in case of government credit risk can have vast effects on the entire economy and world, since defaulting bonds and inability to control inflation will affect countries’ reputation, business transaction, social stability and relations with other countries. 3.

Why is it difficult to sell assets?

The inability to sell assets or investments for cash can be a result of market conditions, lack of buyers, etc. Liquidity risk can be managed by maintaining diversified investment in short term assets, maintaining adequate cash in the business to meet short-term obligations.

What is the purpose of the Federal Reserve's reduced target for interest rates?

To take action against a fall in economy Federal Reserve in the US reduced target for interest rates to promote borrowing and unfreeze credit market.

Which banks went bankrupt?

Investment banking giants like Bear Sterns and Lehman Brothers collapsed declaring bankruptcy as a result of the subprime mortgage crisis in 2008.