Probability
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the likelihood that an outcome or event will occur. Probabilities are stated
as a decimal figure, a percentage, or a fraction.
What are the 2 elements associated with risk?
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uncertainty of outcome + possibility of negative outcome
Distinguish Diversifiable vs. Nondiversifiable Risk
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Diversifiable risks can be managed by spreading (such as purchasing
multiple businesses). Nondiversifiable risks are correlated so that their gains
or losses tend to occur simultaneously rather than randomly.
4 Types of Loss Exposures
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Property, Liability, Personnel, and Net Income
Loss Exposure
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any condition or situation that presents a possibility of loss, whether or not
an actual loss occurs.
Credit Risk
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the risk that customers and other debtors will fail to make promised
payments.
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the likelihood that an outcome or event will occur. Probabilities are stated
as a decimal figure, a percentage, or a fraction.
What are the 2 elements associated with risk?
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uncertainty of outcome + possibility of negative outcome
Distinguish Diversifiable vs. Nondiversifiable Risk
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Diversifiable risks can be managed by spreading (such as purchasing
multiple businesses). Nondiversifiable risks are correlated so that their gains
or losses tend to occur simultaneously rather than randomly.
4 Types of Loss Exposures
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Property, Liability, Personnel, and Net Income
Loss Exposure
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any condition or situation that presents a possibility of loss, whether or not
an actual loss occurs.
Credit Risk
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the risk that customers and other debtors will fail to make promised
payments.
