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.

---

Definitions:

Positivist Perspective

A sociological approach that considers society to be a complex system whose parts work together to promote solidarity and stability, emphasizing empirical, scientific methods to study social phenomena.

Leniency

The act of being more merciful or tolerant than expected, often applied in judicial sentences or disciplinary actions.

Labeling Perspective

A sociological perspective that examines how societal labels, once applied, affect individuals' self-identity and perceptions by others, often leading to a self-fulfilling prophecy.

Lower-Consensus Deviance

Behaviors that are not widely agreed upon as deviant by society, often involving acts that may be frowned upon by some but not considered criminal or immoral by others.