Question

1. What is "risk in a financial sense. What is it that creates risk for companies? Please be specific. (3 pts.) 2. Pick one of the 'subareas' of finance and provide an of what is involved in that subarea. (3 pts.) 3. Describe the role that ethics should play in finance. How do "fiduciary relationships affect this? (3 pts.) 4. Why do companies usually go through a "life-cycle" where they start out as sole proprietorships and then eventually become corporations. What are the primary advantages and disadvantages to becoming a corporation. Explain how "Hybrid Organizations offer an alternative to corporations. What are the advantages and disadvantages of become a hybrid as opposed to a regular corporation? (8 pts.) 5. What are the primary goals of the corporation? What are the primary types decisions managers make in regard to achieving this goal? Please be specific. Exactly how would we know when managers are achieving the desired goal? That is, exactly how would we measure their performance? Also, why aren't cost minimization and market-share maximization necessary good goals? (8 pts.) 6. Explain the Agency Problem and how it can interfere with the primary goal identified in question 5 above. Please be complete. What can corporations do to minimize this problem? (6 pts.) 7. What are usually the highest, and second-highest level financial managers in a typical corporation? What are the responsibilities of the Treasurer? (5 pts.) 8. Describe two areas or situations where finance might be important in your personal life. (4 pts.)

Answer 1

The risk in a financial sense is any event unpredictable through which there are high chances of serious financial loss.

There are various risks for the companies some of the important risk are listed below:

Operational Risk

Credit Risk

Market Risk

Liquidity Risk

Operational Risk : Operational risk occurs when due to unforeseen circumstances in companies operation there is chances of serious financial loss for the company.

Credit Risk : Credit Risk is the risk of not able to service the debt. This risk can bankrupt the company

Market Risk: Market risk is the risk associated with the adverse movement in price of commodity. There can be serious financial loss if there is adverse movement in price of commodity

Liquidity Risk: Liquidity risk is the risk of not able to sell the assets when in need.