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Distinguishing between Speculative Risk and Pure Risk Risk is the chance of loss,...

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Finance

Distinguishing between Speculative Risk and Pure Risk

Risk is the chance of loss, the degree of probability of loss, and the amount of possible loss. There are two different types of risk: speculative risk can result in either profit or loss, whereas pure risk is the threat of loss with no chance of profit. This activity is important because managers should be able to identify which risks are most likely to concern business people and/or threaten the very existence of some firms.

The goal of this activity is to differentiate between speculative risk and pure risk.

Instructions: For each risk described, select whether the risk is a speculative or pure one.

1. threat of fire (Click to select) Speculative Pure

2. buying new machinery (Click to select) Speculative Pure

3. identity theft (Click to select) Speculative Pure

4. acquiring more inventory (Click to select) Speculative Pure

5. threat of flood (Click to select) Speculative Pure

6. purchasing a new manufacturing plant (Click to select) Speculative Pure

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