Online Learning 142020.docx - BWFN3013 \u2013 ONLINE LEARNING HOMEWORK(CLASS Due date 8.00PM Wan Nur Eleena Binti Wan Hanafi(254159 1 Define and briefly

Online Learning 142020.docx - BWFN3013 – ONLINE LEARNING...

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BWFN3013 – ONLINE LEARNING HOMEWORK (CLASS 18/3/2020) Due date: 20/3/2020 8.00PM Wan Nur Eleena Binti Wan Hanafi (254159) 1. Define and briefly discuss each of the following sources of risk with relevant example: a. Business risk Business risk is the degree of uncertainty associated with an investment’s earnings and the investment’s ability to pay the returns owed to investors. It is the exposure a company has to factors that will lower its profits or lead it to fail. Types of business risk are strategic risk, compliance risk and operational risk. For example, a decrease in demand of product will lower the sales and result to a decline in company profits or market share. Another example is high input cost result to an increase in the production cost. This might affect the ability to give return to the investors (common stocks and preferred stocks). b. Financial risk Financial risk is the degree of uncertainty of payment resulting from a firm’s mix of debt and equity. Which mean the larger the proportion of debt financing the greater this risk. It is the risk that a company wont be able to meet its obligations to pay back its debts. Type of financial risk include credit risk, liquidity risk, currency risk and foreign investment risk. For example, company face the possibility of default on debt
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