Financial Risk can be evaluated from different points of views. Explain.

The financial risk can be evaluated from different point of views as follows: (i) From stakeholder's point of view: Major stakeholders of a business are equity shareholders and they view financial gearing i.e. ratio of debt in capital structure of company as risk since in event of winding up of a company they will be least prioritized. Even for a lender, existing gearing is also a risk since company having high gearing faces more risk in default of payment of interest and principal repayment. (ii) From Company's point of view: From company's point of view if a company borrows excessively or lend to someone who defaults, then it can be forced to go into liquidation. (iii) From Government's point of view: From Government's point of view, the financial risk can be viewed as failure of any bank or (like Lehman Brothers) down grading of any financial institution leading to spread of distrust among society at large. Even this risk also includes willful defaulters. This can also be extended to sovereign debt crisis.