Why Is It Important to Evaluate Both the Probability and Likely

question 22

Essay

Why is it important to evaluate both the probability and likely severity of loss when evaluating risk? Provide an example to illustrate your answer.

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Definitions:

Stock Dividends

Stock dividends are a form of dividend payment made by a corporation to its shareholders in additional shares of stock, instead of cash.

Cash Dividends

A portion of a company's earnings distributed to its shareholders as a form of payment or reward.

Stock Split

A stock split occurs when a company divides its existing shares into multiple ones to boost liquidity without changing the overall market value of shareholders' equity.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including the cost of the materials and labor necessary to create the product.