财务风险外文翻译

Research on Financial Risk of the Enterprise Shanshan Li School of economics and management, Henan Polytechnic University, P.R. china 454000 E-mail:shanshanli@hpu.edu.cn Abstract—With the intensification of market competition, the financial risk faced by enterprises increases day by day. This paper primarily probes into the definition, types, causes and potential harms of financial risk, and puts forward some detailed countermeasures to avoid it. Keywords󰀐Financial Risk; Risk Identification; Risk Prevention I. INTRODUCTION With the strengthening of economic globalization and market mechanism, the competition between enterprises is also getting tougher. More enterprises are facing more severe financial risks. Financial risk focuses on the management of uncertainties in companies’financial operating effects. The underestimation of financial risks and ineffective management would cause tremendous economical loss, and some is close to going bankrupt even, close down. So the research in awareness, prevention and control of the financial risks has become an important subject. The study of the financial risk management is not only theoretically but practically significant. II. THE BASIC THEORY OF FINANCIAL RISK A. the Definition of Financial Risk Financial risk, basically speaking, refers to a variety of unpredictable and uncontrollable factors in the financial system existing objectively, which result in the fact that the financial benefits actually deviate from the expected financial benefit, causing the losses of the financial benefits. Financing risk is the existence of an objective economic phenomenon, a variety of financial risks in a concentrated expression, throughout the various segments of the financial activities. From the economics point of view, as a microeconomic risk, the modem corporate financial risk is the currency manifestation of all risks that companies faced, which is the concentrated on expression of all risks. B. the Types of Financial Risk In the market economy conditions, the financial risk is an objective existence. For business, financial risk is closely related to the managements about the raising and assigning of fund, especially fund safety. It reflecting risks when enterprises are in financial activity and dealing with financial relationship. There are several different types of financial risk, including fundraising risk, investment risk and risk of income distribution. 1) Fundraising risk Businesses cannot do without financing. However, financing will surely bring out risks. Fundraising risk means a variety of unpredictable, which is from changes in supply and demand of funds, the whole macroeconomic and market environment changes, and etc. Fundraising risk basically include interest rate risk, exchange rate risk, refinancing risk, the financial leverage and purchasing power risk. Interest rate risk means the cost of financing changes brought the fluctuation of price of finance assets; Exchange rate risk refers to the uncertainty in the foreign exchange business due to exchange-rate flexibility. Refinancing risk means the uncertainty for companies refinancing. The financial leverage is the enterprise use debt adjustment rights and interests capital income method. Enterprises can use the financial lever to bring the interests of the financial lever to enterprise shareholder or the enterprise owner rationally. As a result of financial leverage is influenced by many factors, in the interests of financial leverage was also accompanied by incalculable financial risks. Purchasing power risk refers to some effect on finance affected by currency fluctuations. 2) Investment risk Investment risk refers to risk due to the future of the enterprise income uncertainty, future income and practical; the deviation between the expected return. When developed areas where market development is not mature, and more likely to be a direct result of the increased level of investment risk factor. In China, investment has two forms, that is, direct investment and securities investment. Typically, direct investment involves the purchase of assets such as land, plant. Securities investments include investments in shares and in bonds. For many decades investments in shares and bonds are one of the most commonly used and popular kinds of investments. Investments in shares is a kind of profit mechanism of mutual benefits and risks. The biggest characteristic of bonds invest is stable income, higher safety factor, but also has strong liquidity. Whether investing in stocks or bonds, in the many uncertainties of the market environment, still have to grasp the sound principles of risk prevention. 3) Risk of income distribution. Risk of income distribution, often called transaction exposure, means bad fund movement because of uncertainty in production, supply and sales, resulting in changes in value. The contents of this risk mainly include: purchase risk, production risk, inventory liquidation risk and accounts receivable realizable risk. Purchase risk means insufficient supply of material for changes what vendors made in raw materials, and the changes in actual payment period for 2326978-1-4577-0536-6/11/$26.00 ©2011 IEEE