Risk affects any firm with factors such as war, recessions, inflation and high interest rates is classified as____________?
Correct answer: C. Market risk
- A. Diversifiable risk
- B. Stock risk
- C. Market risk
- D. Portfolio risk
Explanation
War, recessions, inflation and interest-rate changes affect most or all firms and therefore represent market, or systematic, risk. Diversifiable risk is specific to an individual company or industry.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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