ExampleAn investor purchases a stock because she is impressed by recent earnings and the firm's lack of debt. It is later revealed that the firm has massive and unsustainable debt loads hidden in various subsidiaries that is backed by the firm's assets. The stock collapses in price on the news.
|Overview: Inherent Risk|
|Definition||The potential that a firm has a material misstatement in its financial statements.|
|Related Concepts||Financial RiskInvesting RiskBankabilityConcentration Risk|