Preview

financial risk

Good Essays
Open Document
Open Document
970 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
financial risk
First, an overview of financial risk ( A ) The meaning of financial risk
Financial risk is the risk of financial performance of all enterprises , the financial activities of enterprises in the process, due to a variety of unpredictable or uncontrollable factors that effect , is the company's actual return and expected return deviation occurs , which may suffer economic losses possibilities.
( Two ) the characteristics of financial risk
The occurrence of an enterprise financial risk characteristics generally have to
( A ) generating and accumulation of objective necessity . Financial crisis is a market economy under the conditions of the inevitable product of enterprise fund movement is independent of the subjective will exist outside of , is that people can not refuse and exclusion . Financial crises have a process from quantitative to qualitative change , when a variety of reasons gradually accumulated to a certain extent , the financial crisis prone .
( 2 ) the outbreak of progressive and unintentional nature . Financial crisis by many objective and subjective factors, of which a considerable number of factors that have progressive and accidental , therefore, unaware of business entities in the case of mistakes , and in the case of the unconscious and its assumed these mistakes consequences .
( 3 ) causes the diversity and complexity. As business environment , production management and diversification of financial behavior , resulting in the diversification of business failure behavior , triggering the financial crisis, the incentives are also diverse.
( 4 ) and potentially catastrophic consequences . Once the financial crisis occurred , it may lead to bankruptcy . Meanwhile , it is a potential consequence of this , compared to its judgment prediction occurs much more difficult to predict .
( Three ) the main reason for the formation of financial risk Risks can be divided into natural and man-made risks risk , which also includes the risk of

You May Also Find These Documents Helpful

  • Good Essays

    Fin370 Week 1

    • 692 Words
    • 3 Pages

    Risk encompasses many terms, such as financial risk, interest rate risk, firm- specific risk, company-unique risk, exchange rate risk, etc. The word risk itself in business means the likely variability associated with expected revenue or income streams.…

    • 692 Words
    • 3 Pages
    Good Essays
  • Better Essays

    The reasons which caused a so severe crisis were various. I conclude that there were two important factors which led to the crisis so severe.…

    • 1626 Words
    • 7 Pages
    Better Essays
  • Good Essays

    The risk that the failure of one or more troubled financial institution could trigger the contagious collapse of otherwise healthy financial institutions, and possibly endanger the stability of the financial system as a whole, is referred to as ---------------- ----------------.…

    • 290 Words
    • 2 Pages
    Good Essays
  • Good Essays

    The sudden financial crisis and the unexpected economic collapse in 2008 came as a shock to many because the speed and severity of the crisis were unpredicted (Bondt, 2010). Its consequences had strong influences on the financial system of many industrialized countries as well as a large number of developing and emerging economies. Huge cost are carried by every parts of society. Much wealth has been destroyed. Millions of jobs have been lost. The crisis has tarnished the belief in free enterprise, the financial system, and in financial theory (Bondt, 2010).…

    • 1043 Words
    • 5 Pages
    Good Essays
  • Satisfactory Essays

    Econ 2035 Quiz

    • 2001 Words
    • 9 Pages

    • Why are financial crises almost always followed by severe contrac9ons in economic ac9vity? 1 Financial Crisis • Key factor = Asymmetric informa9on…

    • 2001 Words
    • 9 Pages
    Satisfactory Essays
  • Powerful Essays

    American Home Products Case

    • 2292 Words
    • 10 Pages

    In 1981, AHP had reached sales of more than $4 billion by producing 1,500 marketed brands in 4 different kind of business; prescription drugs, packaged drugs, food products, and housewares and households products. Moreover, AHP is known to be the largest and profitable business in prescription of drugs; however, the company has a sizable market share in antihypertensive, tranquilizers, and oral contraceptives. The company has almost debt- free balance sheet and growing cash reserves (40% of net worth in 1981). AHP was able to gain this huge success in these lines was by marketing expertise.…

    • 2292 Words
    • 10 Pages
    Powerful Essays
  • Good Essays

    Financial Crisis of 2008

    • 358 Words
    • 2 Pages

    Cited: Kumar, Patrick. The 2008-2009 Financial Crisis – Causes and Effects. 29 September 2008. <http://cashmoneylife.com>…

    • 358 Words
    • 2 Pages
    Good Essays
  • Powerful Essays

    The financial crisis which the United States is combating today, in many aspects resembles the characteristics and consequences which were the outcome of the Great Depression lasting from the time period 1929 till 1933 (Great Depression).…

    • 3745 Words
    • 15 Pages
    Powerful Essays
  • Best Essays

    Financial crises had repeated several times such as the great depression in 1920, saving and loan crisis in 1986 and Asian crisis in 1997 before the 2007-08 financial crisis. There are a considerable number of articles about the causes of financial crises. Based on the traditional view, the causes of the financial crisis are the government budget imbalances, high inflation, low investment, low savings and low growth rate (Esquivel and Larrain, 1998). Specifically, the causes for the 2007-08 financial crisis stemmed from house price bubbles, the failure of risk management at sub-prime mortgage market and the dysfunctional ranking system and the causes are implicit in the relationship with a moral hazard. The definition of moral hazard is based on Leopold’s description (2009, p. 48): “More insurance could lead to lazier bicycle riders – a moral hazard – who enable more bicycle thefts. In finance the bicycle is risk. If I know I will be bailed out if I assume risk and fail, I’ll assume more and more risk and let you bail me out if I fail”. It mainly arises due to information asymmetry; asymmetric information is the situation in which one party in an economic transaction has better information than the other party.…

    • 1544 Words
    • 7 Pages
    Best Essays
  • Powerful Essays

    Source: „The Current Financial Crisis: Causes and Policy Issues“ by Adrian Blundell-Wignall, Paul Atkinson and Se Hoon Lee…

    • 1831 Words
    • 8 Pages
    Powerful Essays
  • Powerful Essays

    Business risk is the equity risk arising from the nature of the firm’s operating activity, and is directly related to the systematic risk of the firm’s assets. Financial risk is the equity risk that is due entirely to the firm’s chosen capital structure. As financial leverage, or the use of debt financing, increases, so does financial risk and, hence, the overall risk of the equity. Thus, Firm B could have a higher cost of equity if it uses greater leverage.…

    • 4562 Words
    • 19 Pages
    Powerful Essays
  • Satisfactory Essays

    The global financial crisis which started as a mortgage crisis in the United State of America (U.S.) financial market later graduated into a national and subsequently into a global crisis. According Kehinde (2009) in the European Journal of Humanities and Social Sciences Vol. 3, No.1 (2011) “The theory of economic shocks posited that when economic recession occurred, it is only sectoral decline that occurred leading to unemployment, reduced wages, reduced saving and reduced pushed investment. However, a bounce back is expected with autonomous…

    • 609 Words
    • 3 Pages
    Satisfactory Essays
  • Good Essays

    A financial crisis usually involves a substantial disruption in the flow of funds from lenders to borrowers. Also, historically most financial crises in the United States have involved the commercial banking system. In the late nineteenth century U.S. economy spent as much time in recession as it did in expansion. However, after 1950, the U.S. economy experienced a phase of macroeconomic stability from 1950 to 2007. This stability ended with the financial crisis of 2007-2009. The financial crisis of 2007-2009 was the most severe the United States experienced since 1930s. In chapter two of Manias, Panics and Crashes - A History of Financial Crises, Kindleberger and Aliber presented an economic model of a general financial crisis developed by Hyman Minsky. Minsky’s model primarily succeeds in explaining the financial crisis in the United States, Britain and other market economies.…

    • 950 Words
    • 4 Pages
    Good Essays
  • Better Essays

    Cost of Capital

    • 1468 Words
    • 6 Pages

    * Premium for financial risk – The term financial risk refers to the risk on account of pattern of capital structure. In general, it can be said that a firm having higher debt content in its capital structure is more risky as compared to a firm which has comparatively low debt content.…

    • 1468 Words
    • 6 Pages
    Better Essays
  • Powerful Essays

    In 2008, the United States of America a major financial crisis which led to the most serious recession since the Second World War. This all started when the Lehman Brothers, one of the largest investing bank in the world, failed (The financial crisis of 2008: Year in Review by Joel Havemann, Encyclopedia Britannica eb.com). On September 15, 2008 to be exact the fall of the Lehman Brothers resulted to the downfall of the United States stock market and the laying off of employees by many successful companies. Now the question left is how does the failure of this major financial company affects the US stock market and even marked the beginning of the 2008 Global Crisis? In a critical sense, financial business is more important that other industries because finance is necessary for every business to operate…

    • 4146 Words
    • 17 Pages
    Powerful Essays