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What are major areas of risk in financial management? How might the company adjust for projects of differing risk in the approval process?

What are major areas of risk in financial management? What are major areas of financial risk in your company? Which risk management techniques are important to your company? Why?

If a company uses NPV for capital budgeting, how does an analyst adjust for projects of differing risk? If a company, with a normal payback requirement of two years or less, uses the following techniques, how might the company adjust for projects of differing risk in the approval process?

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QUESTION 1

Managing risks is one of the most important tasks of financial management. These risks include interest rate risk, liquidity risk, and foreign exchange risk among others. The company I am working for operates in several geographic areas. Hence, it is faced with the challenge of managing its foreign exchange risk every day. Moreover, financing such as global operations is tricky. The company has to maintain enough cash to finance its day to day operations, but not too much that it loses the opportunity to create value by by-passing investment opportunities. Therefore, liquidity risk is a major area of financial risk within the ...

Solution Summary

The following posting discusses the major areas of risk in financial management and it discusses which risk management techniques are important to the company.

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