The risk exposure when a corporation appears to have insufficient funds to meet day-to-day commitments as they fall due is known as:
A) transaction risk.
B) liquidity risk.
C) interest rate risk.
D) default risk.

Question

Quizplus · Accepted Answer

Liquidity risk refers to the risk of not having enough cash or liquid assets to meet short-term obligations as they become due. It is the risk exposure faced by a corporation when it appears to have insufficient funds to meet day-to-day commitments. This could lead to default and other financial problems, making it a significant concern for investors and creditors.

The Risk Exposure When a Corporation Appears to Have Insufficient