What is risk and why must risk as well as return be consider by the financial manager who is evaluating a decion alterative or action in corporate finance?

Risk refers to the potential for loss or negative outcomes associated with an investment or decision. Financial managers must consider both risk and return because they are fundamentally linked; higher potential returns typically come with greater risk. Evaluating risk ensures that decisions align with the firm's risk tolerance and strategic objectives, enabling managers to balance potential gains against possible losses. This holistic approach is essential for making informed, sustainable financial decisions that support long-term growth.