The size of a firm:
A) has no impact on the ability to retain risk
B) is proportional to the amount of risk it is willing to take
C) determines whether a firm can hedge its risk
D) has an impact on its ability to absorb losses

Question

Quizplus · Accepted Answer

The size of a firm has an impact on its ability to absorb losses. Larger firms may have more resources to absorb losses while smaller firms may face bankruptcy or insolvency if they experience significant losses. The other choices are not accurate as firm size may impact the ability to retain risk and hedge risk but these are not necessarily proportional to firm size.

The Size of a Firm