Briefly discuss the risks that cannot be insured by companies.
What will be an ideal response?
Risks that cannot be insured by companies include business risks, which are related to the inability of a firm to hold its competitive position and maintain stability and growth in earnings. Sometimes, business risk and operating risk are confused, but they are not exactly the same. While business risk occurs because the company does not keep up with its competitors due to lack of research and development, lack of forward planning, and poor management, operating risk focuses on the volatility of operating earnings. Given the cyclical nature of the economy and the stability of the industry, operating risk can be measured by the standard deviation of operating earnings.
Further, financial risk occurs when a firm uses too much financial leverage as measured by the debt to asset ratio, the debt to equity ratio, and the times interest earned ratio. A risk that is always present for corporations with multinational operations is currency risk or currency fluctuations. Changes in the relative value of one currency to another can cause profits denominated in U.S. dollars to go up or down depending on the exchange rate. Additionally, all investors are subject to the interest rate risk caused by changing interest rates; these changes can affect both an investor's income stream and the value of that investor's assets. Political risk is associated with investing in firms operating in foreign countries. Another risk is market risk, which occurs because prices of financial securities and commodities fluctuate over the short term. The final risk is liquidity risk, which is the ability to turn assets into cash quickly.
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Jared James is a top salesperson at a leading manufacturer of agricultural machinery parts. He is a classic directive: decisive, fact-oriented, direct, and focused on closing the deal
He understands the importance of style flexing, however, as not all buyers respond to the directive style. Jared has been thinking about how to approach a new client, Alex Doyle, who is a buyer for a huge combine manufacturer. Alex has a supportive style. What adjustments should Jared make in his usual mode of communicating? A) Jared should focus more on benefits and less on facts in his sales presentation to Alex. B) Jared should make an effort to develop rapport with Alex and plan for several conversations before he attempts to close the sale. C) Jared should take Alex out for dinner at a high-profile restaurant so they can develop a personal relationship before he begins to talk about the product. D) Jared should be sure he has the facts to back up any claims he makes to Alex, and consider sending Alex the research and quality-control reports before their first meeting so Alex can examine the documentation. E) Jared should hang back to let Alex guide the conversation during sales calls so that Alex doesn't feel overwhelmed by Jared's blunt presentation style.
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What will be an ideal response?