Question

Risk versus reward is ongoing in each life. What does it mean and how can we assess it? Why is it important for analysts to evaluate risk versus reward thoroughly and to report on it to users and management?

Answer 1

Answer)

There is a direct relationship between the risk as well as reward for any specified situation. So as to make a greater reward one should make sure to take risk and vice versa. This is otherwise termed as the risk/ return tradeoff.

The proportionality is when there is sufficient and measured risk taken then greater is the reward one can expect.

It is important to analyse the risk versus reward thoroughly as the risk and return spectrum is an important factor for gain or loss in management or any business. The amount of investment and return depends on the risk taken.

Looking towards the profitability margin the risk and return or reward is important and necessary to be analysed.

Hope this answer helps. Happy to help. :)