Term
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Definition
| - The possibilty that some loss might occur |
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Term
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Definition
- Production and yield
- Market and price
- Business and financial
- Technology and obsolescence
- Casualty loss
- Social and legal
- Human |
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Term
| Production and Yield Risk |
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Definition
| - variability in yields and production caused by factors such as weather, disease, pests, genetic variation and timing of practices |
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Term
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Definition
| - Variability and unpredictability of prices |
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Term
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Definition
- ield, output price, and input prices
- associated with characteristics of business |
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Term
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Definition
| - risk associated with financing, meeting fixed financial obligations |
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Term
| Technology and Obsolescence Risk |
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Definition
| - new technology can make current methods obsolete |
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Term
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Definition
| - loss of assets due to fire, wind, hail, flood and theft |
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Term
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Definition
| - government programs and regulations |
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Term
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Definition
| - the character, health and behavior of individuals |
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Term
| Risk Rated Management Strategies |
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Definition
- start with the assignment of probabilistic outcomes
- expected outcome is the one most likely to occur, most likely price, yield and costs
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Term
| Risk Management Rules of Thumb |
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Definition
1. There are no certain profits
2. Higher profits tend to be associated with higher risks of loss
3. There is no "best" strategy
4. Good strategies improve the odds or chance for success
5. Decisions should be evaluated with respect to objects- not hindsight
6. Good decisions sometimes have bad outcomes
7. Good strategies, over time, will produce good results |
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Term
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Definition
- risk of inherent in the firm, independent of the way the firm is financed
- generally reflected in the variability of net operating income or net cash flows |
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Term
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Definition
- Market prices
- Input prices
- Yields |
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Term
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Definition
- added variability of the net cash flows of the owners equity that result from the fixed financial obligation associated with debt financing
- indicates that finacial risk is determined by the degree of business risk inherent in the firm and the relation which is determined by the financing decision |
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Term
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Definition
- a change in business risk from some external source could change the level of total risk if all other variables remain unchanged
- if price support programs changed by the level of business risk increased, the total level of risk would increase
- if the level of total risk excedded the constraint level, adjustment in financial risk would be necessary to maintain total risk at the constrained level |
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