LECTURE 12 FINANCE RISK MANAGEMENT

LECTURE 12 FINANCE RISK MANAGEMENT - FINANCE & RISK...

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FINANCE & RISK MANAGEMENT CHAPTER 16
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Questions about the possible SMU faculty & librarian strike? Information Session for Students with SMUFU President Dr. Larry Haiven and other union members Wednesday November 22 4:00 Loyola 177 also see www.smufu.org
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FINANCE Maximization of cash & investment efficiency Purely rational process
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The Risk-Return Relationship High Lower quality common stocks Corporate bonds with low credit ratings High quality, cyclical common Size of stocks financial returns Medium quality, preferred stocks to attract High quality, stable common stocks investors High grade corporate bonds and commercial paper Short-term Treasury Bills and bank GIC's (risk free) Low Low High (No risk) (Big risk) Uncertainty about financial returns on investments
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Risk Management Conserving a firm’s financial power or assets by minimizing the financial effect of accidental losses Risk: uncertainty about future events Speculative risk: the chance for gain or loss Pure risk: only the chance of loss or Chance of a warehouse fire
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Risk avoidance Stopping participation in or refusing to participate in ventures that carry any risk Firm with delivery trucks could avoid any risk of physical damage or bodily injury by closing down its delivery service Pharmaceutical maker may withdraw a new drug for fear of liability suits
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LECTURE 12 FINANCE RISK MANAGEMENT - FINANCE & RISK...

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