business risk

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Business risk

The risk that the cash flow of an issuer will be impaired because of adverse economic conditions, making it difficult for the issuer to meet its operating expenses.

Business Risk

The risk that a company will go bankrupt. Every company carries the business risk that it will produce insufficient cash flow in order to maintain operations. Business risk can come from a variety of sources, some systemic and others unsystemic. That is, every company has the business risk that the broader economy will perform poorly and therefore that sales will be poor, and also the risk that the market simply will not like its products.

business risk

The risk that a business will experience a period of poor earnings and resultant failure. Business risk is greatest for firms in cyclical or relatively new industries. Business risk affects holders of stocks and bonds, since a firm may be unable to pay dividends and interest.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

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The risk assessment practices of audit firms

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