Which of the following is not a source of financial risk?A) Exchange rates B) Interest rates C) Market Share D) Credit Terms
Question
Which of the following is not a source of financial risk?
A) Exchange rates
B) Interest rates
C) Market Share
D) Credit Terms
Solution
The option that is not a source of financial risk among the ones listed is C) Market Share.
Here's why:
A) Exchange rates: This is a source of financial risk because if a company does business internationally, fluctuations in currency exchange rates can impact profitability.
B) Interest rates: This is a source of financial risk because changes in interest rates can affect the cost of debt for a company. If interest rates rise, so does the cost of borrowing money.
C) Market Share: This is not typically considered a direct source of financial risk. While losing market share can impact a company's revenues and profitability, it's not a financial risk in the same sense as exchange and interest rates. It's more of a business or operational risk.
D) Credit Terms: This is a source of financial risk because if a company extends credit to customers, there's always the risk that those customers will not pay their bills. This is known as credit risk.
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