risk-return-analysis

Vocabulary Word

Definition

Risk-return analysis is a tool used to study the potential gains (returns) against the possibility of losing something (risks). It's like weighing the pros and cons before making an important decision.

Examples in Different Contexts

In investment strategy, 'risk-return analysis' evaluates the potential return of an investment relative to its risk. An investment advisor might advise, 'Performing a risk-return analysis is essential to building a diversified portfolio that aligns with your financial goals and risk tolerance.'

Practice Scenarios

Business

Scenario:

We are considering entering new markets next quarter. It's essential to be well-informed about all possible outcomes.

Response:

I've conducted a risk-return analysis, and it suggests that entering these markets could yield substantial returns with acceptable risks.

Creative

Scenario:

This intricate set design is bound to raise our production costs. Are we confident that this will translate appropriately to audience response?

Response:

Our risk-return analysis reveals that while the set design is more costly, it's likely to generate a positive audience reaction and hence higher ticket sales.