Which of the following could be characterized as a cash flow problem?
A)default risk
B)interest rate risk
C)liquidity risk
D)exchange rate risk

Question

Quizplus · Accepted Answer

Liquidity risk refers to the possibility that a company may not have enough cash or liquid assets to meet its short-term obligations, such as paying suppliers, employees, or debt payments. This is a cash flow problem, as it concerns a company's ability to generate enough cash to cover its expenses. The other options listed do not directly relate to cash flow. Default risk concerns the possibility that a borrower may not be able to repay a loan, while interest rate risk refers to the possibility of interest rate fluctuations negatively impacting an investment or financial instrument. Exchange rate risk refers specifically to the risk of fluctuations in currency exchange rates impacting the value of investments or transactions denominated in a foreign currency.

Which of the Following Could Be Characterized as a Cash