What financial management practice involves investing in high-risk companies with potential for high returns?

The practice of investing in high-risk companies with the potential for high returns is known as venture capital. This form of financing is typically utilized to support early-stage startups or businesses that have not yet secured access to traditional financing methods like bank loans. Venture capitalists are often willing to take on significant risk because they believe that a successful venture can yield substantial profits, potentially far exceeding the initial investment.

Venture capital not only provides the necessary funding for these companies to grow, but also offers valuable resources, mentorship, and networks that help propel the business forward. This contrasts with other financial management practices such as risk management, which focuses on identifying and mitigating potential losses, asset management, which involves managing a portfolio of assets to achieve desired investment returns, and debt financing, which refers to raising capital through loans from financial institutions or issuing bonds. Each of these practices serves a different purpose in the field of finance, but venture capital specifically targets high-risk, high-reward investments.