• Financial risk is usually associated with the possibility of losing money.
  • The most frequently cited financial risk is the possibility that a company’s cash flow will not be sufficient to meet its obligations.
  • Financial risk can also refer to a government that defaults on its bonds.
  • Credit risk, liquidity risk, asset-backed risk, foreign investment risk, equity risk and currency risk are common forms of financial risk.
  • Investors can use a range of financial risk ratios to assess a company’s prospects.