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Answer: Both the company's risk capacity and risk appetite will increase.
**D is correct.** Since the company receives a round of equity funding, the company's capital increases and thus increases its risk capacity. Since the company will switch its focus to riskier projects, it adjusts the amount and type of risk the company is willing to accept, which increases risk appetite. **A is incorrect.** The company's risk capacity will increase as well. **B is incorrect.** The risk appetite will increase as well. **C is incorrect.** Both the company's risk capacity and risk appetite will increase.
Author: LeetQuiz .
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A start-up company is undergoing a series of operational changes. The company expects to receive a round of equity capital to finance its growth strategies. A risk manager at the company is evaluating the risk of the company as well as the company's new capital structure. The manager notes that the company has decided to switch its business focus to riskier projects upon receiving the equity funding. Which of the following is most likely correct for the manager to conclude once the funding completes and the new projects are undertaken?
A
The company's risk capacity will decrease and its risk appetite will increase.
B
The company's risk capacity will increase and its risk appetite will decrease.
C
Both the company's risk capacity and risk appetite will remain the same.
D
Both the company's risk capacity and risk appetite will increase.