Long-run financial risk:
A) can frequently be hedged on a permanent basis.
B) is best hedged on a division by division basis within a conglomerate.
C) is related more to near-term transactions than to advancements in technology.
D) generally results from changes in the underlying economics of a business.
E) can generally be hedged such that the financial viability of a firm is protected.

Question

Quizplus · Accepted Answer

Long-run financial risk generally results from changes in the underlying economics of a business, such as new competitors, changing demand and supply, or changes in technology. Unlike short-term financial risks, long-run financial risks cannot be completely hedged on a permanent basis. Therefore, the best strategy is to manage and adapt to these changes in the long run by analyzing the market trends and coming up with innovation or new strategies to stay competitive.

Long-Run Financial Risk