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Marketing and Financial Management - Essay Example

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Marketing and Financial Management

In addition, these risks are critical in evaluating the amount of investment and the rate of return that is required by investors on their investment with a company. Some of these risks are:
This refers to the poor earning reports, legal actions against company, management ineffectiveness, or potential bankruptcy related issues that might keep an investor from investing into the company's securities and stocks (Altamira Investment Services, 2003).
Credit risk refers to the possibility that the company will not be able to meet its obligations and pay off its debts as and when these become due. If this situation arises, this could have a drastically negative affect on the company's performance and its perception into the minds of potential investors. This might also result into a decline in stock prices and may ultimately lead to solvency problems for the company.
Exchange rate risk is one of the most critical risks for every investment decision. This refers to the situation where movements in exchange rates adversely affect the investments for an individual or the company. The exchange rates may move in favor of or against the investments for people. ...
However, if exchange rates show an increasing trend, an investor might not be willing to invest into a company's securities until the return from the investment in securities is more than the return from investments in foreign currency. In addition, for multinational companies or for those who try to diversify their portfolio by investing into foreign currencies, exchange risk might be a very critical element to take into account before making the investment.
1.1.4 Financial Risk
Finance risk is critical in the evaluation of investment proposals for investing in to a company's assets and securities. Liquidity risk refers to the situation when the company has no liquidity or cash to meet its obligations. This leads to insolvency and in the longer run, to bankruptcy. This can be calculated by analysing the financial statements for the company and by looking at its cash flow statements. The ratios like current ratio and quick ratio also provide information about the financial liquidity conditions of the company. These ratios should be calculated while making a decision about the financial conditions of a company where the potential investment is to be made.
1.1.5 Liquidity Risk
The liquidity risk refers to lack of marketability of an investment in securities or bonds. This means that the investment can not be converted into cash easily when required. This puts a serious limitation on the cash generating capability of a company that might lead to problems in both short and long terms.
1.1.6 Country and Market Risks
Some other risks that might be investigated before making an investment decision include country risk and market risks. These risks refer to adverse external environment conditions over which a company has lesser or no control. These risks ...Show more

Summary

Investment risk refers to the probability and likelihood that the investments made by individuals as well as corporate investors do not provide the required returns that were calculated before the decision for the investment was made. There may be a number of investment risks that directly or indirectly affect investments…
Author : deondre51
Marketing and Financial Management essay example
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