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Financial Times Handbook of Corporate Finance, 2nd Edition by Glen Arnold

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18

THE FINANCIAL RISKS MANAGERS HAVE TO DEAL WITH

IntroductionTypes of riskRisk in the financial structureThe dangers of gearingWhat do we mean by gearing?Agency costsPecking orderSome further thoughts on debt financeRounding up the capital structure argumentsConclusionWebsitesNotes

Introduction

Running a business naturally entails taking risks – it is what business activity is about. Satisfactory profits rarely emerge from a risk-eliminating strategy; some risk is therefore inevitable. However it is up to managers of firms to select those risks the business might take and those that it should avoid. Take a company like GlaxoSmithKline which accepts high risks in its research and development programme. Should it also take a risk with exchange ...

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