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 portfolio management, 'risk-return analysis' helps in the assessment of the trade-off between the risk of an investment and its expected return. A portfolio manager might discuss, 'Our risk-return analysis indicates that adding bonds to the portfolio can reduce volatility while maintaining expected returns.'

Practice Scenarios

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.

Tech

Scenario:

With the proposed system upgrade, we need to be sure if the potential business benefits will outweigh the costs and possible disruptions.

Response:

The risk-return analysis recommends proceeding with the system upgrade as the long-term business benefits will surpass the short-term disruption.