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what does “Risk appetite company” means and
A risk-averse company will tend to operate with higher levels of inventory and receivables than a company which is more risk-seeking.
mean?
Having low levels of inventory and/or receivables will likely reduce costs for the company, but is more risky – low levels of inventory mean there is more risk of running out of inventory; low levels of receivables can mean a low current ratio which means more risk of having liquidity problems.
Some companies prefer to have low levels to save money, and accept more risk. Other companies prefer higher levels to have less risk, but accept it will cost them more.
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