{"id":18210,"date":"2026-04-08T06:13:02","date_gmt":"2026-04-08T06:13:02","guid":{"rendered":"https:\/\/4botany.appscodestudio.com\/?p=18210"},"modified":"2026-04-08T06:13:02","modified_gmt":"2026-04-08T06:13:02","slug":"why-it-matters-48","status":"publish","type":"post","link":"https:\/\/4botany.appscodestudio.com\/index.php\/2026\/04\/08\/why-it-matters-48\/","title":{"rendered":"Why It Matters"},"content":{"rendered":"\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/openstax.org\/apps\/image-cdn\/v1\/f=webp\/apps\/archive\/20260209.222123\/resources\/aa9887855a9df9a5a887965ddeb49632cf768721\" alt=\"Lettered dice spell out the word risk on top of dollar bills.\" width=\"1750\" height=\"803\"><strong>Figure&nbsp;<\/strong><strong>20.1<\/strong>&nbsp;Financial managers must consider prudent ways to manage economic volatility and the risk it poses to a company. (credit: modification of \u201cRisk text on Dollar banknotes\u201d by Marco Verch\/flickr CC BY 2.0)<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Chapter Outline<\/h2>\n\n\n\n<p>20.1\u00a0The Importance of Risk Management<\/p>\n\n\n\n<p>20.2\u00a0Commodity Price Risk<\/p>\n\n\n\n<p>20.3\u00a0Exchange Rates and Risk<\/p>\n\n\n\n<p>20.4\u00a0Interest Rate Risk<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"page_7292bd53-4634-42cf-9c08-58918aad45d4_titlecreatedbycookbook\">Why It Matters<\/h2>\n\n\n\n<p id=\"para-00001\">Each year,&nbsp;American Airlines&nbsp;consumes approximately four billion gallons of jet fuel.<sup><a href=\"https:\/\/openstax.org\/books\/principles-finance\/pages\/20-why-it-matters#foot-00001\">1<\/a><\/sup>&nbsp;In the spring of 2018, jet fuel prices rose from an average of $2.07 per gallon to a price of $2.19 per gallon.<sup><a href=\"https:\/\/openstax.org\/books\/principles-finance\/pages\/20-why-it-matters#foot-00002\">2<\/a><\/sup>&nbsp;A $0.12-per-gallon increase in the price of jet fuel may not seem significant, but on an annualized basis, a price increase of this magnitude would increase the company\u2019s jet fuel bill by approximately $500 million.<\/p>\n\n\n\n<p id=\"para-00002\">That added cost cuts into the profits of the company, leaving less money available to provide a return to the company\u2019s investors. Rising costs could even cause the business to become unprofitable and close, causing many employees to lose their jobs. The financial managers of American Airlines are not able to control the price of jet fuel. However, they must be aware of the risk that price volatility poses to the company and consider prudent ways to manage this risk.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Figure&nbsp;20.1&nbsp;Financial managers must consider prudent ways to manage economic volatility and the risk it poses to a company. (credit: modification of \u201cRisk text on Dollar banknotes\u201d by Marco Verch\/flickr CC BY 2.0) Chapter Outline 20.1\u00a0The Importance of Risk Management 20.2\u00a0Commodity Price Risk 20.3\u00a0Exchange Rates and Risk 20.4\u00a0Interest Rate Risk Why It Matters Each year,&nbsp;American Airlines&nbsp;consumes [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1861],"tags":[],"class_list":["post-18210","post","type-post","status-publish","format-standard","hentry","category-risk-management-and-the-financial-manager"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/4botany.appscodestudio.com\/index.php\/wp-json\/wp\/v2\/posts\/18210","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/4botany.appscodestudio.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/4botany.appscodestudio.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/4botany.appscodestudio.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/4botany.appscodestudio.com\/index.php\/wp-json\/wp\/v2\/comments?post=18210"}],"version-history":[{"count":1,"href":"https:\/\/4botany.appscodestudio.com\/index.php\/wp-json\/wp\/v2\/posts\/18210\/revisions"}],"predecessor-version":[{"id":18211,"href":"https:\/\/4botany.appscodestudio.com\/index.php\/wp-json\/wp\/v2\/posts\/18210\/revisions\/18211"}],"wp:attachment":[{"href":"https:\/\/4botany.appscodestudio.com\/index.php\/wp-json\/wp\/v2\/media?parent=18210"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/4botany.appscodestudio.com\/index.php\/wp-json\/wp\/v2\/categories?post=18210"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/4botany.appscodestudio.com\/index.php\/wp-json\/wp\/v2\/tags?post=18210"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}