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Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977

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BuyFindarrow_forward

Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
ISBN: 9781285867977
Textbook Problem

Discuss some of the techniques available to reduce risk exposure.

Summary Introduction

To discuss: The techniques to reduce risk exposure.

Introduction:

The probability of loss or a negative occurrence in an outcome of the business organization is termed as risk. The actual result from the business organization might differ from the expected outcome due to the risk factor.

Explanation

The techniques that are used to reduce risk exposure are as follows:

  • A firm can transfer their risk to an insurance company. This can be done by paying periodic premium as per the insurance company guidelines based on the firm’s risk exposure.
  • The firm even can transfer its risk to a third party.
  • The firm can enter into derivative contracts to reduce financial risks and input price risks...

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