Review on financial risk procedures for assessing companies

financial risk procedures categorize into four different measurement groups: (a) performance risk procedures, (b) bankruptcy risk procedures, (c) stock performance risk procedures, and (d) strategic risk procedures.

a) Performance Risk Procedures: ROA, ROE, and EPS are firm performance indicators and combinations of these three ratios have had application as risk procedures.Companies with high or diminished variations of these ratios are considered more (or less) risky.

b) Bankruptcy Risk Procedures: measures such as profitabiliuty, cash flow and leverage ratios as predictor variables

c) Stock Performance Risk Procedures:  two risk procedures related to stock performance according to the capital asset pricing model (CAPM): beta and unsystematic risk.

d) Strategic Risk Procedures:A risk is considered strategic and is related to the field of activity in which the company acts. A risk is voluntarily assumed with the purpose of creating a competitive advantage and of appreciating a company in the light of its competitors. Other risks over which a company has no control are known as non-strategic risks, such as changes in the economic or political scenario, the effects of wars, etc. Two additional risk procedures are book-to-market ratios and debt-to-equity