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Risk Measurement Tool

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comment on the first risk measurement tool you would use and why for any two of the following:

* Short term liquidity risk * Long term solvency risk * Credit risk * Bankruptcy risk.

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Solution Summary

This solution of 414 words discusses and analyzes the measurement tools of short-term liquidity risk and long-term solvency risk. It includes definitions, explanations, example and calculations of each tool.

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Risk management
Comment on the first risk measurement tool you would use and why for any two of the following:
* Short term liquidity risk * Long term solvency risk * Credit risk * Bankruptcy risk.

1) Short-term liquidity risk
The first risk measurement tool that I would use to measure the short-term liquidity risk is the current ratio. Current ratio is calculated by dividing the current liabilities from current assets.
Current ratio = Current assets / Current liabilities.
Current assets are those assets that can be quickly converted into cash or can be utilized within a period of one ...

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  • MCom, Annamalai University
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