Question 1

A "prudent person" is also known as

Accepted Answer

A)  a tort. 
B)  the reasonable standard. 
C)  indemnification. 
D)  a personnel risk. 
A)  a tort. 
B)  the reasonable standard. 
C)  indemnification. 
D)  a personnel risk. B

Question 2

When purchasing property insurance, a business owner can use the named-peril approach, which provides the broadest protection available.

Accepted Answer

A) True 
 B)False  False

Question 3

Commercial general liability insurance covers

Accepted Answer

A)  business interruption expenses. 
B)  injury to customers. 
C)  automobile liability 
D)  profession liability. 
A)  business interruption expenses. 
B)  injury to customers. 
C)  automobile liability 
D)  profession liability. B

Question 4

The nature of business risk can be observed from two perspectives: asset risk and pure risk.

Accepted Answer

A) True 
 B)False

Question 5

Match the term with its definition.
-A managed-care network providing health insurance that is less expensive than that of a HMO but more limiting in choices of medical care providers

Accepted Answer

A) all-risk approach 
B) business risk 
C) compensatory damages 
D) Economic damages 
E) health maintenance organization (HMO)
F)market risk
G)named-peril approach
H)peril
I)preferred provider organization (PPO)
J)pure risk 
A) all-risk approach 
B) business risk 
C) compensatory damages 
D) Economic damages 
E) health maintenance organization (HMO)
F)market risk
G)named-peril approach
H)peril
I)preferred provider organization (PPO)
J)pure risk

Question 6

Self-insurance requires designating part of a firm's insurance proceeds to provide life insurance on key employees.

Accepted Answer

A) True 
 B)False

Question 7

Real property risks include damage to buildings.

Accepted Answer

A) True 
 B)False

Question 8

Match the term with its definition.
-Wrongful acts or omissions for which an injured party can take legal action against the wrongdoer for monetary damages

Accepted Answer

A) business interruption insurance 
B) funds transfer fraud 
C) indemnification clause 
D) key-person life insurance 
E) personnel risks
F)reasonable (prudent person) standard
G)torts
H)workers' compensation insurance
I)workers' compensation legislation 
A) business interruption insurance 
B) funds transfer fraud 
C) indemnification clause 
D) key-person life insurance 
E) personnel risks
F)reasonable (prudent person) standard
G)torts
H)workers' compensation insurance
I)workers' compensation legislation

Question 9

Which of the following statements about health insurance is true?

Accepted Answer

A)  Group health insurance policies typically do not cover outpatient services and preventive care. 
B)  A health maintenance organization (HMO) is generally more expensive than a preferred provider organization (PPO). 
C)  Employees with health insurance typically must pay a co-pay for office visits to the doctor and for prescriptions drugs. 
D)  With a health maintenance organization (HMO), employees must stay with a network of providers or face higher out-of-pocket expenses in the event of a claim. 
A)  Group health insurance policies typically do not cover outpatient services and preventive care. 
B)  A health maintenance organization (HMO) is generally more expensive than a preferred provider organization (PPO). 
C)  Employees with health insurance typically must pay a co-pay for office visits to the doctor and for prescriptions drugs. 
D)  With a health maintenance organization (HMO), employees must stay with a network of providers or face higher out-of-pocket expenses in the event of a claim.

Question 10

Match the term with its definition.
-A loss in which physical damage to property reduces its value to the property owner

Accepted Answer

A) actual cash value (ACV) 
B) commercial general liability (CGL) insurance 
C) direct loss 
D) disability buyout insurance 
E) disability insurance
F)indirect loss
G)loss avoidance
H)loss prevention
I)loss reduction
J)replacement value of property 
A) actual cash value (ACV) 
B) commercial general liability (CGL) insurance 
C) direct loss 
D) disability buyout insurance 
E) disability insurance
F)indirect loss
G)loss avoidance
H)loss prevention
I)loss reduction
J)replacement value of property

Question 11

An insurance agent should provide information in designing an insurance plan; the small business owner will only need to determine the price the company can afford.

Accepted Answer

A) True 
 B)False

Question 12

A managed-care network providing health insurance that is more expensive than that of a health maintenance organization (HMO) but offers a broader choice of medical providers is called a

Accepted Answer

A)  key-person organization. 
B)  package policy. 
C)  personal maintenance organization. 
D)  preferred provider organization (PPO). 
A)  key-person organization. 
B)  package policy. 
C)  personal maintenance organization. 
D)  preferred provider organization (PPO).

Question 13

When considering the feasibility and affordability of insuring small potential losses, which company program will impact this decision?

Accepted Answer

A)  Actual cash value (ACV) 
B)  FICA 
C)  Self-insurance 
D)  Workers' compensation 
A)  Actual cash value (ACV) 
B)  FICA 
C)  Self-insurance 
D)  Workers' compensation

Question 14

A carton of eggs broke onto the floor in the dairy section at a grocery store, making the floor slippery. Little Johnny slipped, fell, and hit his head on the floor, causing a cut and mild concussion. The grocery store incurs _____ liability for his injuries.

Accepted Answer

A)  premises 
B)  operations 
C)  professional 
D)  product 
A)  premises 
B)  operations 
C)  professional 
D)  product

Question 15

_____ is the cost to replace personal property and rebuild real property at today's prices.

Accepted Answer

A)  Property loss 
B)  A peril 
C)  The replacement value of property 
D)  The actual cash value (ACV) 
A)  Property loss 
B)  A peril 
C)  The replacement value of property 
D)  The actual cash value (ACV)

Question 16

A consulting firm that typically does not have clients visit its business location would have minimal premises liability exposure.

Accepted Answer

A) True 
 B)False

Question 17

Market risk is the possibility of losses associated with the assets and earnings potential of a firm.

Accepted Answer

A) True 
 B)False

Question 18

Risk is

Accepted Answer

A)  a chance all entrepreneurs take. 
B)  a probability that adverse conditions will result. 
C)  the possibility of suffering harm or loss. 
D)  usually avoidable. 
A)  a chance all entrepreneurs take. 
B)  a probability that adverse conditions will result. 
C)  the possibility of suffering harm or loss. 
D)  usually avoidable.

Question 19

Match the term with its definition.
-The cost of replacing personal property and rebuilding real property at today's prices

Accepted Answer

A) actual cash value (ACV) 
B) commercial general liability (CGL) insurance 
C) direct loss 
D) disability buyout insurance 
E) disability insurance
F)indirect loss
G)loss avoidance
H)loss prevention
I)loss reduction
J)replacement value of property 
A) actual cash value (ACV) 
B) commercial general liability (CGL) insurance 
C) direct loss 
D) disability buyout insurance 
E) disability insurance
F)indirect loss
G)loss avoidance
H)loss prevention
I)loss reduction
J)replacement value of property

Question 20

Match the term with its definition.
-Coverage that provides benefits to employees injured at work

Accepted Answer

A) business interruption insurance 
B) funds transfer fraud 
C) indemnification clause 
D) key-person life insurance 
E) personnel risks
F)reasonable (prudent person) standard
G)torts
H)workers' compensation insurance
I)workers' compensation legislation 
A) business interruption insurance 
B) funds transfer fraud 
C) indemnification clause 
D) key-person life insurance 
E) personnel risks
F)reasonable (prudent person) standard
G)torts
H)workers' compensation insurance
I)workers' compensation legislation

Exam 23: Managing Risk

A "prudent person" is also known as

When purchasing property insurance, a business owner can use the named-peril approach, which provides the broadest protection available.

Commercial general liability insurance covers

The nature of business risk can be observed from two perspectives: asset risk and pure risk.

Match the term with its definition. -A managed-care network providing health insurance that is less expensive than that of a HMO but more limiting in choices of medical care providers

Self-insurance requires designating part of a firm's insurance proceeds to provide life insurance on key employees.

Real property risks include damage to buildings.

Match the term with its definition. -Wrongful acts or omissions for which an injured party can take legal action against the wrongdoer for monetary damages

Which of the following statements about health insurance is true?

Match the term with its definition. -A loss in which physical damage to property reduces its value to the property owner

An insurance agent should provide information in designing an insurance plan; the small business owner will only need to determine the price the company can afford.

A managed-care network providing health insurance that is more expensive than that of a health maintenance organization (HMO) but offers a broader choice of medical providers is called a

When considering the feasibility and affordability of insuring small potential losses, which company program will impact this decision?

A carton of eggs broke onto the floor in the dairy section at a grocery store, making the floor slippery. Little Johnny slipped, fell, and hit his head on the floor, causing a cut and mild concussion. The grocery store incurs _____ liability for his injuries.

_____ is the cost to replace personal property and rebuild real property at today's prices.

A consulting firm that typically does not have clients visit its business location would have minimal premises liability exposure.

Market risk is the possibility of losses associated with the assets and earnings potential of a firm.

Risk is

Match the term with its definition. -The cost of replacing personal property and rebuilding real property at today's prices

Match the term with its definition. -Coverage that provides benefits to employees injured at work

The Entrepreneurial Lifethe Entrepreneurial Life

Integrity, Ethics, and Social Entrepreneurship

Starting a Small Business

Franchises and Buyouts

The Family Business

The Business Plan: Visualizing the Dream

The Marketing Plan

The Organizational Plan: Teams, Legal Structures, Alliances, and Directors

The Location Plan

Understanding a Firms Financial Statements

Forecasting Financial Requirements

A Firms Sources of Financing

Planning for the Harvest

Building Customer Relationships

Product Development and Supply Chain Management

Pricing and Credit Decisions

Promotional Planning

Global Opportunities for Small Businesses

Professional Management and the Small Business

Managing Human Resources

Managing Small Business Operations

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