Answer to Question #50870 in Management for Iyyappan

Answer to Question #50870 in Management for Iyyappan


Question #50870

Every financial decision has an impact on the risk return Profile of a firm.” Therefore, the financing decision of Working capital of a firm also determines the risk return Profile of a firm with regard to its working capital. Do you agree with the statement? Support your answer with necessary examples

Expert’s answer

Answer on Question #50870, Management, Other In general, the greater the risk associated with any investment, the greater the return required. Either risk profile – whether used to describe the willingness to accept risk or an evaluation of the risks to which an entity is exposed – can be expressed in graphical form. Risk is often measured in terms of risk probability – the likelihood that a risk will occur and risk impact – a measure of the consequences (such as project costs and schedule) if the risk occurs. Investors, for example, can evaluate the risk to which a portfolio is exposed and make buy and sell decisions based on this risk and their willingness to accept risk.So, the statement is true.

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