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There is a typically a positive correlation (a relationship between two variables in which both move in the same direction) between risk and return. However, correlation does not guarantee that taking greater risk results in a greater return. Taking greater risk may result in a larger amount of capital. A more correct statement may be that there is a positive correlation between the amount of risk and the potential for return. Generally, a lower risk investment has a lower potential for profit. A higher risk investment has a higher potential for profit but also a potential for a greater loss (Segal, 2021). The textbook explains a model of valuation called the dividend discount model which helps describe that the valuation of a stock is simply the “present value of the expected future cash flow stream” (Besley S., & Brigham E., 2016). Additionally, the value of a stock over a period is concerned with the dividends received. Factoring in risk, generally a stock with a higher risk could be expected to pay higher dividends.

        Just like an individual seeking credit, the riskier a firm is, the costlier their debt would be in the form of higher interest rates. Firms commonly seek bonds and loans to fund their operation and if a firm is new or generally perceived as risker, companies providing loans would seek a high interest rate, or a firm would have to offer their corporate bonds with a high rate to attract investors. 

        Capital structure highlights the proportion of debt and equity used for financing the operations of business. Each firm is different, and the “ideal” capital structure will vary by firm. However, the ideal capital structure should be one that “…increases the value of equity share or maximizes the wealth of equity shareholders” (Samishka, n.d.). Since debt is considered riskier than equity, but equity is generally more expensive than debt. While there are many factors to capital structure, some factors to consider for capital structure are a) cash flow position, b) interest coverage ratio, and even c) control of the firm. Since a firm is required to pay back their debts to continue to operate, they may seek a higher debt ratio if they have stable, high cash flows. Interest coverage ratio (ICR) is calculated as EBIT/Interest. A high ICR means companies can have more borrowed funds since they can theoretically afford their interest obligations. Since equity shareholders have voting rights in a firm, the more a firm uses equity to fund their operations, they are directly giving up voting rights (control) of the firm. Debtholders have no voting rights, so balancing these is important if the firm doesn’t want to give up too much control of their organization.

Financial risk is a firm’s ability to manage debt and financial leverage, while business risk is a firm’s ability to generate sufficient revenue to cover its operational expenses. For example, financial risk refers to the risk of a firm not generating cash flow and defaulting on debt payments and business risk as the risk that the firm will be unable to generate revenue to be profitable. Some types of expenses that are concerned with business risk are salaries, production costs, facility rent, office, and administrative expenses (Maverick, 2021). Despite these differences, both financial and business risk require a firm to generate revenue to fund operations, and they require a balance to be used effectively. As discussed within capital structure, a firm is lower cash flows may not focus their structure on debt and instead look towards equity in the form of stock. However, if a firm cannot generate cash flows to become profitable, they will have difficulty finding investors and may not be able to raise the desired level of funding for the firm.

Sample Solution

Sample solution

Dante Alighieri played a critical role in the literature world through his poem Divine Comedy that was written in the 14th century. The poem contains Inferno, Purgatorio, and Paradiso. The Inferno is a description of the nine circles of torment that are found on the earth. It depicts the realms of the people that have gone against the spiritual values and who, instead, have chosen bestial appetite, violence, or fraud and malice. The nine circles of hell are limbo, lust, gluttony, greed and wrath. Others are heresy, violence, fraud, and treachery. The purpose of this paper is to examine the Dante’s Inferno in the perspective of its portrayal of God’s image and the justification of hell. 

In this epic poem, God is portrayed as a super being guilty of multiple weaknesses including being egotistic, unjust, and hypocritical. Dante, in this poem, depicts God as being more human than divine by challenging God’s omnipotence. Additionally, the manner in which Dante describes Hell is in full contradiction to the morals of God as written in the Bible. When god arranges Hell to flatter Himself, He commits egotism, a sin that is common among human beings (Cheney, 2016). The weakness is depicted in Limbo and on the Gate of Hell where, for instance, God sends those who do not worship Him to Hell. This implies that failure to worship Him is a sin.

God is also depicted as lacking justice in His actions thus removing the godly image. The injustice is portrayed by the manner in which the sodomites and opportunists are treated. The opportunists are subjected to banner chasing in their lives after death followed by being stung by insects and maggots. They are known to having done neither good nor bad during their lifetimes and, therefore, justice could have demanded that they be granted a neutral punishment having lived a neutral life. The sodomites are also punished unfairly by God when Brunetto Lattini is condemned to hell despite being a good leader (Babor, T. F., McGovern, T., & Robaina, K. (2017). While he commited sodomy, God chooses to ignore all the other good deeds that Brunetto did.

Finally, God is also portrayed as being hypocritical in His actions, a sin that further diminishes His godliness and makes Him more human. A case in point is when God condemns the sin of egotism and goes ahead to commit it repeatedly. Proverbs 29:23 states that “arrogance will bring your downfall, but if you are humble, you will be respected.” When Slattery condemns Dante’s human state as being weak, doubtful, and limited, he is proving God’s hypocrisy because He is also human (Verdicchio, 2015). The actions of God in Hell as portrayed by Dante are inconsistent with the Biblical literature. Both Dante and God are prone to making mistakes, something common among human beings thus making God more human.

To wrap it up, Dante portrays God is more human since He commits the same sins that humans commit: egotism, hypocrisy, and injustice. Hell is justified as being a destination for victims of the mistakes committed by God. The Hell is presented as being a totally different place as compared to what is written about it in the Bible. As a result, reading through the text gives an image of God who is prone to the very mistakes common to humans thus ripping Him off His lofty status of divine and, instead, making Him a mere human. Whether or not Dante did it intentionally is subject to debate but one thing is clear in the poem: the misconstrued notion of God is revealed to future generations.

 

References

Babor, T. F., McGovern, T., & Robaina, K. (2017). Dante’s inferno: Seven deadly sins in scientific publishing and how to avoid them. Addiction Science: A Guide for the Perplexed, 267.

Cheney, L. D. G. (2016). Illustrations for Dante’s Inferno: A Comparative Study of Sandro Botticelli, Giovanni Stradano, and Federico Zuccaro. Cultural and Religious Studies4(8), 487.

Verdicchio, M. (2015). Irony and Desire in Dante’s” Inferno” 27. Italica, 285-297.