Question

In: Accounting

What is risk and revenue management? How to analyze risk and revenue management of a company...

What is risk and revenue management? How to analyze risk and revenue management of a company by looking into the company financial report?

Solutions

Expert Solution

Risk is the essential element in the business affairs and we can not completely ignore business risk that is why risk management is essential in every type business activity. So we can say that risk management refers to the process which start from the identification of the risks or risky areas and proper actions to manage or mitigation of these risks. In other words we can say that risk management refers to the process of identification, analysis and mitigation of uncertainty in the business operations. Thus risk management process involves identification and management of the business threats.

Now let’s see revenue management;

Revenue management refers to the process of management of revenues of the firm & company. Revenue is the life line of the business thus without proper revenues a business can not survive, in other words we can say that there are various ups & downs in the business that is why management of the revenues is must. So revenue management means identification of sources of revenues and also manage these revenues in such a way so that in case of business ups & downs a proper flow of revenues can be maintained.

Yes, it is true that we can analyze risk and revenue management of a company by looking into the company financial report because financial reports of the company contains all relevant financial information about solvency, liquidity, profitability and activity etc. So on the basis of financial information we can identify various types of financial risks such as risks related to debt, risk related to fixed expenditures, risks related liquidity, risk related to solvency, risk related to operating and financial leverages etc. Financial statements also provide information about the revenue management. Income statement provides information about all types of income & expenditures thus we can know flow and management of the revenues. Balance sheet also provides information about the current assets and current liabilities which shows inflows & outflows of revenues.

Thus we can say that financial reports & financial statement helps in analyze risk and revenue management of a company.


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