BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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In business, Risk can be ____ through appropriate management techniques and diversification
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Avoided
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Eliminated
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Reduced
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Maximized
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Explanation:
Detailed explanation-1: -Diversification involves spreading your investment dollars among different types of assets to help temper market volatility. As a simple example, all equity (or stock) investments and most fixed income (or bond) investments are subject to market fluctuation.
Detailed explanation-2: -Having a business plan, watching your cash flow and getting the right types of insurance in place are all important ways to reduce business risk.
Detailed explanation-3: -Unsystematic risk can be mitigated through diversification, and so is also known as diversifiable risk. Once diversified, investors are still subject to market-wide systematic risk. Total risk is unsystematic risk plus systematic risk.
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