Options for the blank:

First two blanks: increase/decrease

Third: enhanceegate

Fourth: enhancing its ability to fund its optimal capital budget / developing comparative advantage in hedging / improving management's opportunities for earning bonuses and additional compensation

Fifth and sixth: increase/decrease

1. Reasons to manage risk Firms deal with different types of risk in their day-to-day operations and adopt risk management strategies. It is important to understand why firms manage risk. Theoretically, financial management strategies should be undertaken when they increase the price of the firm's common stock. This means that your analysis of a risk management strategy should also involve an examination of the consequences of the strategy on the firm's free cash flows and its WACC. For the strategy to increase the firm's share price, it should decrease the firm's expected future free cash flows and/or decrease its WACC. In certain cases, bondholders and shareholders hedge their investments individually to meet their desired risk management objectives. This is often referred to as a homemade hedge. The use of a homemade hedge by well-diversified investors can negate the benefits of risk management activities undertaken by the firm. Manchester Mortgage Makers Company is working to stabilize its cash flows by using risk management techniques. It has been reluctant to raise external equity capital due to high flotation costs and market pressures. Management is most likely concerned with in order to manage risk. If a firm begins to use risk management techniques to stabilize its annual operating cash flows, the debt capacity of the firm should Risk management will the probability of bankruptcy when it is used to reduce the volatility of a firm's cash flows. 1. Reasons to manage risk Firms deal with different types of risk in their day-to-day operations and adopt risk management strategies. It is important to understand why firms manage risk. Theoretically, financial management strategies should be undertaken when they increase the price of the firm's common stock. This means that your analysis of a risk management strategy should also involve an examination of the consequences of the strategy on the firm's free cash flows and its WACC. For the strategy to increase the firm's share price, it should decrease the firm's expected future free cash flows and/or decrease its WACC. In certain cases, bondholders and shareholders hedge their investments individually to meet their desired risk management objectives. This is often referred to as a homemade hedge. The use of a homemade hedge by well-diversified investors can negate the benefits of risk management activities undertaken by the firm. Manchester Mortgage Makers Company is working to stabilize its cash flows by using risk management techniques. It has been reluctant to raise external equity capital due to high flotation costs and market pressures. Management is most likely concerned with in order to manage risk. If a firm begins to use risk management techniques to stabilize its annual operating cash flows, the debt capacity of the firm should Risk management will the probability of bankruptcy when it is used to reduce the volatility of a firm's cash flows