Financial Risks

Overview

People should understand the impact of different types of risk on financial health, whether they’re dealing with personal or corporate finances. The risks involved with personal finance often only impact individuals and families—for example, when determining if you can afford to buy a house or deciding whether to invest in stocks. Financial risks for businesses often affect multiple people throughout the entire company, including individuals who do not work in the finance department. When businesses make finance-related decisions, it is essential that they know how their decisions will impact different aspects of their company.

Prompt

Read the Assessing a Company’s Future Financial Health case study, then write a response.

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Specifically, you must address the following rubric criteria:

  • Systematic and Unsystematic Risk: Explain the differences between systematic and unsystematic risk.
  • Financial Risks: Describe the potential impacts of the following types of financial risk on the company featured in the case study:
    • Interest rate risk
    • Economic risk
    • Credit risk
    • Operational risk
  • Lower Growth Impact: Explain the impact a lower growth in sales could have on the dividend policy and retained earnings for the company featured in the case study.
  • Higher Growth Impact: Explain the impact a higher growth in sales could have on the dividend policy and retained earnings for the company featured in the case study.

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