1.4.2 Risk & Liability Flashcards
1
Q
What is risk
A
The probability of damage, loss or injury occurring
2
Q
When does a bank face risk
A
When lending capital
3
Q
What is the risk for the return on investment
A
Less than the expected return
4
Q
How does the market impose risk
A
General trade can influence interest rates & exchange rates
5
Q
What is unlimited liability
A
A type of business where the owners are responsible for all of the debt/liabilities gathered by a business
E.g. if the business cannot meet the financial obligations, the owners’ personal assets can be taken to fulfil the debt
6
Q
What is limited liability
A
When the owners’ losses do not exceed the amount invested into the firm
