NISM Certifications · NISM-Series-XV: Research Analyst · Company Analysis - Business and Governance
An analyst studies a company's business model and finds that it earns most revenue from a single customer who accounts for 60% of sales. Which risk does this chiefly represent?
This is customer concentration risk. When one customer contributes 60% of sales, losing that customer or having it demand lower prices would sharply reduce revenue and profit, so the company's business is highly exposed to a single relationship.
- ACustomer concentration riskCorrect
- BCurrency translation risk
- CDividend distribution risk
- DStock liquidity risk
Explanation
Dependence on one customer for 60% of sales means loss or renegotiation of that account would sharply hurt revenue and margins. This is customer concentration risk. The other options concern currency, dividends and trading liquidity, none of which is described.
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