FINANCIAL RISK Definition

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FINANCIAL RISK is the possibility of whether a bond issuer will default, by failing to repay principal and/or interest in a timely manner. Usually bonds issued by the federal government, for the most part, are immune from default (if the government needs money... more is printed). Bonds issued by corporations are more probable to be defaulted on, since companies often go bankrupt. Municipalities occasionally default as well, but it is much less common. Can also be called default risk or credit risk.

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OPPORTUNITY COST is widely used in business planning in evaluating capital investment. A company measures the projected return against the anticipated return it would receive on a highest yielding alternative investment that contains a similar risk profile.

DRAFT, in import / export, is a contract between buyer and seller that the buyer will pay a certain amount of money, within a specified period of time, for the goods purchased.

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