Which of the Following Statements Concerning Risk Management Is NOT

question 19

Multiple Choice

Which of the following statements concerning risk management is NOT CORRECT?

• A) Risk management can reduce the volatility of cash flows,and this decreases the probability of bankruptcy.
• B) Risk management makes sense for firms directly engaged in activities that involve commodities whose values can be hedged,but it doesn't make much sense for most other firms.
• C) Companies with volatile earnings pay more taxes than companies with more stable earnings due to the treatment of tax credits and the rules governing corporate loss carry-forwards and carry-backs.Therefore,our tax system encourages risk management to stabilize earnings.
• D) Risk management can reduce the likelihood of low cash flows,and therefore reduce the probability of financial distress.
• E) Risk management involves identifying events that could have adverse financial consequences and then taking actions to prevent and/or to minimize the damage caused by these events.

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Definitions:

Innovation

The process of creating new ideas, products, or methods, often leading to improvements or advancements in a particular field.

Requirements for Innovation

Critical conditions or inputs needed to foster creativity, including a supportive culture, resources, and an environment that encourages risk-taking and experimentation.

Leadership Performance

The effectiveness and outcomes of a leader's actions in guiding and influencing an organization or group towards achieving its goals.

New and Usable Ideas

Innovative and practical concepts that can be implemented to solve problems or enhance processes.