Question

1. Explain why stock ownership is more liquid than real estate ownership

2. Define financial risk briefly and give examples.

Answer 1

1. Stock ownership is more liquid than real estate ownership because stocks are regularly traded on the stock exchanges and these stocks are having a high level of liquidity because they can be offloaded as and when required.

these stocks are also non tangible in nature, so there is a very low level of requirement in order to offload the shares, whereas real estates are tangible in nature and there is a low level of Liquidity because they are not traded.

2. Financial risk relates to all such threats and possibilities of reduction in the rate of return and reduction in the overall capital which has been applied to an investment.

These financial risk will be reflecting all such threats which makes the business and investment vulnerable for potential resources

Example of financial risk would be losing on the value of the investment due to to decrease in value of shares due to crash in the market.