SIE practice questionmediumFinancial risk
If rising debt expenses cause a corporation to experience cash flow problems, what risk is being realized?
- AMarket risk
- BInterest rate risk
- CFinancial risk✓ Correct answer
- DCurrency risk
Explanation
Why C — Financial risk
Financial risk stems from the use of debt and the chance of being unable to meet financial obligations. The other risks are unrelated to leverage.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 1,867+ SIE questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Spot an error in this question or explanation? Tell us — we fix these fast.
Related Risk & Portfolio Management questions
- Which bond has the least reinvestment risk?
- What type of risk is most present when a new competitor enters the market and a company’s sales decline?
- An investor in thinly-traded small-cap stocks is concerned about which risk when selling?
- A mutual fund that invests only in technology startups is exposed to high:
- A U.S. investor earns a positive return in Japanese equities, but due to a weakening yen, the investor experiences a…
- An investor in a pass-through Ginnie Mae security must consider:
- Why is call risk a disadvantage for investors in callable bonds?
- Which bondholder is most exposed to call risk?