Final answer:
Proper risk return management for a firm means determining the appropriate trade off between risk and return. It is important to find a balance between taking risks and earning returns.
Step-by-step explanation:
Proper risk return management for a firm means that the firm must determine an appropriate trade off between risk and return. This means that a firm needs to find a balance between taking risks and earning returns.
It is not about taking as few risks as possible or earning the highest return possible, but rather making decisions that consider the potential risks and rewards.
For example, if a company decides to invest in a risky project with the potential for high returns, they must also evaluate the likelihood of failure and potential losses.
On the other hand, if they choose a low-risk investment, the potential returns may not be as high. So, it is important for firms to carefully assess the risk-return tradeoff to make informed decisions.