T

7. A company faces two kinds of risk. A firm-specifi

risk is that a competitor might enter its market and

take some of its customers. A market risk is that the

economy might enter a recession, reducing sales.

Which of these two risks would more likely cause the

company's shareholders to demand a higher return?

Why?

Question

Payne

Business

21 September, 18:16

T

7. A company faces two kinds of risk. A firm-specifi

risk is that a competitor might enter its market and

take some of its customers. A market risk is that the

economy might enter a recession, reducing sales.

Which of these two risks would more likely cause the

company's shareholders to demand a higher return?

Why?

+2

Answers (1)

Know the Answer?

Willie Bryan · Answer 1

The risk of recession will most likely cause the company's shareholders to demand a higher return.

Explanation:

If the company loses some customers, more might be attracted to the company. However, if the prices drop, the price might stay low and cause the financial value of stock to drop. Once the stock drops, the entire company loses money along with their stock, which is determined by their profit and loss.