For example, consider a highly leveraged
entity that identifies refinancing risk—
the possibility that it cannot obtain new or
additional financing with affordable interest
rates—as a potential threat to an organization’s
profitability. Entities may assess
this as more likely to occur during times
of increasing interest rates. To measure the
significance of the financial risk, the owner
or manager will use both qualitative and
quantitative factors. An example of a quantitative
factor would be stress-testing the
income statement with hypothetical