The risk and return is a principle in economic and finances which defines the relationship between the financial returns the business enterprises make and the amount of risk involved in the process of investment.
Equity returns are the profits the business company always obtains from the interest and tax that arise from the businesses running in the market. The equity returns always pose a risk to the business organization because the higher the investment to increase the equity returns in business enterprise, the greater the risks as well. This is because to establish higher equity returns the more factors put in place to ensure increase returns which then enhances the probability of business uncertainties.
Many investors usually rent out the property for business venturing reasons or in some cases due to limited utilization. The property is always rented out with the aim of returns, and in most cases, it always gives great financial returns. It is also of risk because the client might misuse the rented property and upon achievement of their purpose, they leave without fixing the problem, this reduces the quality of the property of the rented property that affects the returns. There is the likelihood of disasters that could affect the property for example floods might destroy the property or even fire due to electricity whose effect can be adverse to affect the business.
The investor or business company is subject to provide loans as a method to boost other business firms or due to a request by the companies seeking a loan. The loans usually have an interest whose rate is good for business in which they can yield good returns, but it is also risky because the loaned group or company may fail to repay the loan due to lack of money or even lack of commitment. Some may even relocate and change contacts so that they cannot be traced. The one who gave the loan will incur losses it might even affect the individual business operation.
Submit Your Homework for a free quote