Risk capital
In finance, risk capital has two meanings:
- capital which the investor is prepared to risk losing, and can therefore invest in ways that offer a high expected return, but also a significant risk of failure. Typical outlets include startup companies or futures and options contracts.
- Capital which is held in safe, liquid, but low-income forms, to act as a buffer against unexpected financial problems. An enterprise with inadequate risk capital may face insolvency due to a short-term shock even if its long-term finances are healthy.
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Categories: Finance