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The economy only affects businesse risk, not financial risk? True or false

The economy only affects businesse risk, not financial risk? True or false
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Answer #1

False

Working of the economy affects and is affected by the financial market as well. What happens in the financial market affects the economy via affecting the other markets and what happens in other markets of the economy affect the financial market. For example, a crisis in the housing market in 2007 resulted in a crisis in financial market as well as in other related markets.

Business risks are associated with profitability and revenue generation which depends on market activities, expansion and recessions, as well as business and consumer optimism. On the other side financial risks are linked with abilities to acquire finance through debt equity and other means. Both these risks are somehow related to the business cycle of expansions and contractions. Thus, economy affects the financial activities and the associated risks.

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