© 2000 John Petroff
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© 2000 John Petroff |
It is time to identify what constitutes financial risk, what methods are used to measure it, and how if can be predicted. The table on the left shows that we will cover five subsections. The subsections suggest the harm from financial risk: increased volatility of earnings per share, potential for default and consequences of bankruptcy. The full extent of the potential harm to a firm from using excessive debt will be further investigated when considerations of production and marketing strategies are brought into the picture in following sections. Here we isolate the harm that is specifically associated with debt.
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