Interpretation Homework Help


From the summary of results in Table, it can be seen clearly that the hedging approach is the most risky while the conservative approach is the least risky. The trade stands midway; less risky than the hedging approach but more risky than the conservation approach. The measure of risk is the level of NWC. From the point of view of profit (reflected in the level of total cost of financing plan) a similar kind of relationship is found the trade off plan lying between the other two approaches. The preceding analysis, thus, established the trade off between profitability and risk. In this connection two generalization and warranted: (i) the lower the NWC the higher is the risk present, and (ii) the higher the insolvency, the higher is the expected profits.

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