What is the risk of Incorrect Rejection?

Q: What are the other alternatives eliminated by the method of payback screening method?

A: Following are the other alternatives eliminated by the method of payback screening method: The…

Q: What is a Material Weakness?

A: Material Weakness: Material weakness is the often the result of deficiencies in one or more of a…

Q: Explain the difference between unique risk and systematic risk

A: Answer

Q: How is sensitivity analysis used to cope with uncertainty in decision making?

A:

Q: What is the best-case scenario?

A: When companies are uncertain about the details of a project such as costs, inflows, interest rate…

Q: What does Vouching test?

A: Vouching is the process that involves reviewing of original evidence to check whether the…

Q: What items could increase the risk of material misstatement?

A: Risk of material misstatement (ROMM) is a risk that the financial statements when audited will…

Q: Is a method of screening out in certain situations an unacceptable investment alternative?

A: Capital budgeting is the technique that is used in business to determine the best investment…

Q: what is control risk

A:

Q: What can be understood by abnormal return?

A: Note firstly we understand what is meaning of abnormal return. Basic meaning of abnormal return is…

Q: What is risk? What is the difference between systematic and unsystematic risk?

A: Risk: Risk can be defined as upcoming uncertainty about variation from anticipated earnings or…

Q: What is a scenario analysis? What is it designed to show, and how does it differ froma sensitivity…

A: Scenario analysis is the technique of analyzing the portfolio to find out the expected value of…

Q: The process of determining which risks to insure and which applicants to reject is known as

A: Given information The process of determining which risks to insure and which applicants to reject…

Q: what are the conditions for classical immunization to be not effective?

A: Classical Immunization:- Classical immunization can be characterized as the formation of a fixed-pay…

Q: “Costs of abnormal spoilage are losses.”Explain.

A: Abnormal spoilage is spoilage that is not inherent in a specific production process and will not…

Q: analysis needed

A: Risk Analysis is a process that helps you identify and manage potential problems that could…

Q: definition of political risk and how mitigate it?

A: Political risk are risk arising due to political parties of countries with change in government…

Q: What is event risk?

A: Event risk is the likelihood of a sudden event adversely affecting an organization, industry, or…

Q: What is the criticism for using SMB and HML as risk factors?

A: The Fama and French Three-Factor Model (or Fama French Model for short) is an asset pricing model…

Q: Why is the additional risk not taken without expected additional return?

A: The risk-return tradeoff takes note of that the potential return increments with an expansion in…

Q: What happens when Control Risk is below the maximum level?

A:

Q: What is Normal spoilage?

A: Definition:   Spoilage: Spoilage is the defective item at intermediate or final stage. The spoilage…

Q: What is risk and give examples

A: While making investment decisions risk and return should be taken into consideration.

Q: Define control risk and detection risk. What is the difference between control risk and detection…

A: Auditing:   In auditing, auditors verify the correctness and fair presentation of financial…

Q: What is the difference between systematic risk and unsystematic risk? Give an example of each.

A: Risk: The possibility that the actual outcome in a situation will differ from the expected outcome…

Q: How does/can a financial intermediary reduce the risk facing them due to Adverse Selection?

A: The question is based on one of the key issue in financial market, banking industry,  about the…

Q: What is the risk of Incorrect Acceptance?

A: Risk of incorrect acceptance: The risk that the sample selected by the auditor may show that there…

Q: What controls would you implement to

A: Internal Control system: Internal control system can be defined as the set of policies and…

Q: What is a Control Deficiency?

A:

Q: What do "threat," "vulnerability," and "risk" really mean?

A: Threat : A declaration of purpose to cause someone pain, harm, damage, or other hostile action as…

Q: What should occur when a low level of Detection Risk is acceptable?

A: Detection risk is the risk that procedures performed to reduce audit risk will not detect a material…

Q: Why are these coming up as wrong?

A: Step 1 Journal is the part of book keeping. In this Interest is due or outstanding at market rate…

Q: What are the risks that exist in the conversion cycle and the changes needed to reduce the risks?

A: The risks involved in the current system of the conversion cycle are as given below: There can be a…

Q: What is required if a Material Weakness is identified?

A:

Q: Discuss some of the techniques available to reduce risk exposure.

A: Risk exposure means possible losses which can be occur in future due to specific projects or…

Q: Identify the weakness and the risk relating to the above.

A: Answer: The weakness is the shortcoming in any process and risk is the factor that result due to…

Q: Explain risk aversion

A: Introduction: Risk can be characterized in terms of the uncertainty of future consequences resulting…

Q: What is the relationship between Evidence and Detection Risk?

A: Detection risk is the risk that an auditor will not find a material misstatement in a client's…

Q: What is underpricing? Why is it used? What evidence do we have to support the belief that…

A: Underpricing is a common term used in Initial public offering of shares of a private company which…

Q: What is the implication of the cost of the “wrong decision” in the selection process

A: Selection process refers to the process in which we choose an alternative from all the available…

Q: What is loss aversion?

A: What is loss aversion?

Q: What is the risk of assessing Control Risk too high?

A: Control risk refers to the probability of financial statements that were considered wrongly stated…

Q: Are you able to differentiate between risks that are inherent and those that can be controlled?

A: Inherent risk- A material mis-statement that occurs due to error or due to omission  in the…

Q: What are the risks associated with conversion cycle and changes need to reduce that risks?

A: Cash conversion cycle The cash conversion cycle is a method that tracks the time a company would…

Q: Why is it important to remember that payback screening is not an end in itself?

A: The payback period is defined as a number of years takes by a project to recover the initial cost of…

Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.