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