Problem: You are a senior financial consultant for 123 Corporation. Your CEO has asked that you train incoming consultants on financial management and risks.
You develop a lesson plan comparing financial risks of a popular retail clothing company and a utility company to help the trainees better understand risk management.
1) Discuss the differences in risks associated with a retail clothing company versus a utility company.
2) Which company has the potential for higher risk?
3) Identify at least 3 sources of risk.
4) Compare stability and variability in earnings, as well as the optimal debt ratio between the two - which company has the highest, and which has the lowest?
5) Explain your rationale for each of your answers.