Delimitation of the topic
How knowledgeable are the students of the accounting and administration faculty campus I of the administration and accounting careers in order to detect a financial risk in the company?
knowledge-about-financial-risk-of-students-at-a-university-of-mexicoProblem Statement
How prepared are the students of the Bachelor of Administration and Accounting to detect financial risks in a company?
goals
Know the level of knowledge that students have to face a financial risk situation in a company.
Research framework
Financial risk
Financial risk is a broad term used to refer to the risk associated with any form of financing. The risk can be understood as the possibility that the benefits obtained are less than expected or that there is no return at all.
Therefore, financial risk encompasses the possibility of any event occurring with negative financial consequences. A whole field of study has been developed around financial risk to reduce its impact on companies, investments, commerce, etc. In this way, more and more emphasis is placed on the correct management of capital and financial risk, introduced in modern portfolio theory by Harry Markowitz, in 1952, in his article "Portfolio Selection" published in The Journal ot Finance magazine.
Types of financial risk
There are different types of financial risk, mainly considering the source of the risk. Thus we can distinguish 4 large groups:
- Market risk Credit risk Liquidity risk Operational risk
Market risk
Market risk refers to the probability that the value of a portfolio, whether investment or business, will decrease due to the unfavorable change in the value of the so-called market risk factors. The four standard market factors are:
- Interest rate risk: risk associated with the exchange rate against interest rates.Exchange risk (or currency risk): is the risk associated with changes in the exchange rate in the currency market.Commodity risk: associated risk to changes in the price of basic products. Market risk (strictly speaking): in a narrow sense, market risk refers to the change in the value of financial instruments such as stocks, bonds, derivatives, etc.
Credit risk
Credit risk derives from the possibility that one of the parties to a financial contract does not make payments in accordance with the provisions of the contract. Due to not complying with obligations, such as not paying or delaying payments, the losses that may be suffered include loss of principal, loss of interest, decrease in cash flow or derived from increased collection expenses.
Liquidity risk
Liquidity risk is associated with the fact that, even having the assets and the willingness to trade with them, the purchase / sale of these cannot be made, or cannot be done quickly enough and at the right price, either for avoid a loss or to make a profit. Two types of liquidity risk can be distinguished:
- Asset Liquidity: An asset cannot be sold due to lack of liquidity in the market (in essence it would be a type of market risk). Given this lack of liquidity, you can see an increase in the spread between the Bid and ask price, which leads to the operation being carried out at a less appropriate price. Financing liquidity: risk that the liabilities cannot be satisfied on their date expiration or that can only be done at an inappropriate price.
Operational risk
The operational risk derived from the execution of the activities of a company or trade. It includes a wide variety of factors such as those related to personnel, fraud risk or due to the environment, among which the country or sovereign risk is one of the most influential.
Decreased financial risk
The elimination of financial risk is not possible, but it does reduce its impact. For this, there are experts in the selection of portfolios and business strategies aimed solely at this purpose. These strategies include diversification and hedging.
Diversification works because the performance of different assets is highly unlikely to correlate perfectly, and therefore by carefully choosing different assets and studying the historical correlation between them, you can build a diversified portfolio in which the impact of risk financial situation is less than what a separate asset may suffer at any given time.
Hedging, or hedging, basically consists of combining assets in the same portfolio so that the fluctuations of some offset the fluctuations of others
Ways to minimize risk
The first way to minimize risk is evaluating the return on investment, bearing in mind that the more information you have about what you want to invest, the lower the risk.
- Anticipating the future. The capture of information is an important element, since if you know how to handle that information it will allow us to follow an innovative business strategy that will help us decide on our products and services, react to our competition, anticipate the changes that are taking place in the market, in technology, etc. Diversifying risk, planning an investment portfolio that balances high-risk operations with high-security operations. Evaluating the results obtained. Having a professionalized management, that is, highly specialized in new trends in the financial system, we can cope with these risks. Use tools for financial risk management, such as Delphos.Protect certain assets by taking out insurance, however, if the risk appears, we can carry out the following sequence of steps to manage the risk: (See PDF)
Justification
Carrying out this field work will allow us to know what level of knowledge is being obtained by the students of the campus I accounting and administration faculty, focusing on administration and accounting degrees, regarding how to face a risk situation in a company.
Hypotheses and variables
The knowledge of the students of the degrees of administration and accounting is scarce because the study plan does not delve into the topic of financial risks in the company, but rather addresses it to great risks.
Methodological design
Regarding the methodological design, we can say that the experimental was used in this research, since it seeks to know if the knowledge is good or scarce in the students.
Population and sample
Due to time constraints, it was not possible to survey the total number of students in the faculty, so it was decided to take a sample of only 20 students.
This sampling was carried out by strata (in this case there were 10 students from the bachelor's degree in administration and 10 from the bachelor's degree in accounting in the same semester, respectively), in order to represent them in the research.
Data collection
Once the sample was obtained, the instrument used for this study was applied to them and consisted of a questionnaire of 10 questions, 3 open-ended and 7 multiple-choice.
Here the survey:
Dear partner:
During the time that we have been in the faculty, as students, we have been able to realize that the level of learning is low regarding some subjects. Worrying situation that has served as motivation to do fieldwork on this issue. In order to know how prepared you are regarding the topic of: "Financial Risks in the Company".
For the preparation of this investigation, we require your valuable support, which consists of completing the following questionnaire.
1.- Do you know what finances are?
Yes No Explain: _____________________________________________________________________
________________________________________________________________________________________
2.- Do you know what a financial risk is?
Yes No Explain: _____________________________________________________________________
________________________________________________________________________________________
3.- Mention the main financial statements: _______________________________________
________________________________________________________________________________
4.- What are the two classes of risk that exist?
- a) Total Risk and Comparative Risk b) Economic Risk and Financial Risk c) None of the above
5.- What are the types of financial risks?
- a) Credit, liquidity, market and operational b) Demand and supply c) Cost, administrative and market
6.- What are the types of reasons used to analyze the financial position of a company?
- a) From debt to total assets and acid test b) Current and liquidity c) Liquidity, leverage, profitability and activity.
7.- What is credit risk?
- a) It is the possibility of economic loss derived from the breach of the obligations assumed by the counterparties of a contract b) It is the ability of the company to meet its short-term commitments c) The two previous
8.- What is liquidity risk?
- a) It is the ability to measure the company in the delivery of its products or servicesb) It is to show the intensity of the company to use its assets and thus generate salesc) It is the ability to measure the company to meet its short-term commitments term
9.- What is an investment portfolio?
- a) It is a selection of documents or securities that are listed on the stock market and in which a person or company decides to place or invest their money b) It is a place where the company keeps its investment papers c) None of the above
10.- Proposes that the investor should approach the portfolio as a whole, studying the characteristics of risk and global profitability, instead of choosing individual securities by virtue of the expected profitability of each particular security:
- a) markowitz modelb) investment model c) litterman model
Data processing
To group the data provided by each of the applied questionnaires, the following procedure was carried out:
- A reading of the opinion responses given by all the informants was carried out. It was noted that within the diversity of responses there is a similarity of ideas. Regarding the above, it allowed to formulate statements that represent each of the ideas expressed by the informants, assigning them a control number to facilitate its handling in the capture stage. As for the closed responses, they were also classified using letters and numbers. The capture stage was carried out, these data already processed made possible the analysis of the responses and the corresponding graphs.
Analysis and interpretation of results
According to the surveys applied to the Fca-I students, 90% answered the question and 10% did not.
Based on the surveys applied in Fca-I, we were able to realize that the students have knowledge of the financial risk that exists or usually happens in companies with a satisfactory result, from which we take all the answers 100% as the answers have similarity as to the idea.
Regarding this question, we found 100% satisfactory results since the surveyed students from the different careers of this faculty answered this question correctly, since they know what the main financial statements are.
Based on the results obtained from the Fca-I surveys, the students could be notorious about the waiting time it took to answer this question, since to know the risk classes they told us that they did not know it, but according to what was obtained 80% answered satisfactorily with economic and financial risk, while 20% did not get it right.
When analyzing the surveys applied in this Fca-I we found that of 100% of the sample of the students surveyed, it could be noted that 60% answered the applied question mentioning the types of credit-liquidity-market and operational and 40% it did not succeed in responding with the type of demand and supply, administrative costs and the market.
The surveys applied in this Fca-I the favorable results for this question were not since 40% answered satisfactorily while 60% negatively, this emphasizes that the students of this Fca-I need more support or advisers on the subject of finance.
Regarding this question applied in this Fca-I, the students answered 65% assertively that it is the possibility of economic loss derived from the breach of the obligations assumed by the counterparties of the contract, while 35% did not hit it. This shows comparing with the previous answers the students of this Fca-I are not prepared for the labor field.
With this question applied to the students of the Fca-I, the result was notable with 90% satisfactory, answering with what is the ability to measure the company to meet its short-term commitments, while 10% did not succeed.
To the surveyed students of this Fca-I about this question, 85% answered correctly that it is a selection of documents or securities that are quoted on the stock market and in which a person or company decides to place or invest their money, while that 15% did not get it right.
According to the surveys applied in this Fca-I regarding this question, 60% know this model, which tells us that the investor must approach the portfolio as a whole, studying the characteristics of risk and global profitability, instead of choosing individual values by virtue of the expected profitability of each particular value, while 40% do not know it, this shows us that not all students are well prepared in the subject of finance so knowing the risk in a company already in practice it will be difficult and how to apply safeguards will be more difficult.
Conclusions
The hypothesis set forth in this work was confirmed when performing the analysis of the results obtained in the research, since these indicate the scarce knowledge that the students of the accounting and administration degree have.
We could see that during the interview many students thought too much about the answer and some dared to answer anything, even not answer.
We could see that the students of the accounting career are a little more familiar with this type of financial issues, because when we observed them when they answered the questionnaire we realized that they did it more quickly and without thinking about it too much, we even realized that two students to whom the administration career survey was applied had to rely on the Internet and search for the answers.
The results of the present investigation show that the study plan of the university should be modified so that the students have more knowledge in this type of subjects that are essential in the career, however we also cannot try to blame only the study plan. I study for the lack of knowledge, if not that the students should also inquire more about topics that are not much discussed.
The investigated problem has been worrying for us as a team, so this work was not only carried out to cover a task that had to be presented, but with the result of knowing how the faculty to which we belong is located and how to help to that this situation changes.
We hope that the results of this modest investigation will awaken, both for teachers and for students, the awareness that only with joint effort can a solution be found to a problem that affects the professional training of the members.
Bibliography
- Amez, fm (2003). Dictionary of accounting and finance in fm amez, dictionary of accounting and finance (p. 320). Cultural madrid.Biegeri, u. (2014). Banking, finance and ethics beyond the growth myth. In u. Biegeri, banking, finance and ethics beyond the growth myth (p. 232). Mexico: sal terrae. Díaz, ay (2005). The stock market in the financial market. In a and days, the stock market in the financial market (p. 323). Mexico.
