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What Are the Risks Faced by Company Shareholders?

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Submitted By vidushaushan
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What are the risks faced by company shareholders?
The basic idea behind finance is that all shareholders investments. Shareholders another fundamental thing to the company but Shareholders to have an element of risk attached to them for there are career risk faced by company Shareholders mainly be categorized in to-: * Financial risk * Political risk * Management risk * Economic risk * Business risk
• Financial risk
This risk depends on how a business is funded in the long run. There are two types of funding available to a business, which are shareholders funds (equity) or loan funds (debt). shareholders fund leads to ownership and profit sharing, whereas debt leads to repayment of interest and capital. The Debt to Equity ratio is known as Gearing and as this increases, the financial risk faced by the shareholders increases as well.
• Political risk
Even though political forces affect all businesses, some are more vulnerable than others. The hotels in Sri Lanka are affected by local as well as international political and terrorist activities, whereas the apparel sector is affected by the political forces in the US and Europe. Political situation things also another risk to the shareholders.
• Management risk
The risk faced by most businesses is from the management teams themselves since they are in charge of managing the business, and can sometimes be driven by other agendas. The wrong person managing the company it’ worse cases to shareholders and it’s misusing to the company.
• Economic risk
Different industries can get affected by economic factors in different forms. In sri lanka the export firms such as apparel and tea are dependant on foreign economies. Importers are affected by the risk of exchange rate fluctuations.
• Business risk Vidusha ushan

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