One of the key risk areas that corporates need to manage is "ethical risks." Do you think that management of ethical risks is as important for business as management of financial risks? Explain how ethical problems may affect a firm's profits and stock price
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- A well-run company should align the management’s interest and with the owner’s interests. What are some actions that stockholders can take to ensure that management’s and stockholders’ interests are aligned? Is this important? What are some of the risks/consequences if the management’s interests are not aligned with the owners?2. What business risks does P&G face that may threaten its ability to satisfy stockholderexpectations? What are some examples of control activities that the company could use toreduce these risks? (Hint: Focus on page 28 of the annual report).What business risks does Toll Brothers face that may threaten the company’s ability tosatisfy stockholder expectations? What are some examples of control activities that thecompany could use to reduce these risks? (Hint: Focus on pages 10–11 of the 10-K.)
- Discuss the benefits of managing financial risks in a company?1. Explain the concept of of Principle no. 2 of Financial Management "There is risk-Return Trade Off2.Give examples of financial decisions faced by companies and individualsExplain how the concepts of risk and return drive invesments in business world
- b) Risk management is concerned with understanding and managing the risks that an organization faces in its attempt to achieve its objectives. These risks will often represent threats to the organization – such as the risk of heavy losses or even bankruptcy. Risk management has traditionally associated itself with managing the risks of events that would damage the organization.Organizations face many different types of risks including financial risk, financial risks relate to the financial operation of a business– in essence, the risk of financial loss (and in some cases, financial gain) – and take many different forms. These include currency risks, interest rate risks, credit risks, liquidity risks, cash flow risk, and financing risks. The importance of these risks will vary from one organization to another. A firm that operates internationally will be more exposed to currency risks than a firm that operates only domestically; a bank will typically be more exposed to credit risks…Which of the following statements is(are) true about ESG? Select one or more: a. ESG is an important consideration in financial decisions as it provides a positive impact for long-term success for corporates through “Risk Reduction”. b. ESG is an important consideration in financial decisions as it provides positive impact for long-term success for corporates through “Fiscal policy”. c. ESG is an important consideration in financial decisions as it provides positiveWhy should a financial decision maker such as a corporate treasurer or CFO be concerned with market efficiency?
- Explain the principle of increasing financial risk and why it is important when assessing the financial and economic merits of a businessmatch the correct description with the correct term. Descriptions Terms The level and nature of risk attributable to a firm’s activities and operations, and ignoring the risks associated with the firm’s capital structure. Asymmetric information The situation in which outsiders, such as external shareholders, credits, suppliers, and customers have less and inferior information about a firm’s past, current, and future conditions and prospects, compared to the firm’s managers. Business risk The extent to which a firm’s cost structure contains a large proportion of fixed costs, which raises its level of business risk if the firm’s sales decline. Capital structure This practice of employing a large proportion of fixed-cost sources of financing, such as debt securities and preferred stock, exposes a firm’s stockholders to more business risk. EPS indifference point The ability of a firm to borrow money at a reasonable cost when good investment opportunities arise…11. Which of the following security holders receives a lower returns with low risk? . T-Bill B. Common shareholders C. Stakeholders D. Creditors 12. The advantage of a company compared a sole trader as form of business organisation is: A. Quick decision making B. Access to external professional management skills C. Use of own funds D. Inability to access external funds Thank you!!!