Question 1

A property insurance policy is used by a business owner to insure buildings and personal property owned, but not leased, by the business.

Accepted Answer

A) True 
 B)False

Question 2

Richard must carry workers' compensation insurance to fulfill his _____ liability obligation.

Accepted Answer

A)  professional 
B)  tort 
C)  contractual 
D)  statutory 
A)  professional 
B)  tort 
C)  contractual 
D)  statutory

Question 3

Match the term with its definition.
-Minimizing potential losses by preventing, avoiding, and/or reducing risk

Accepted Answer

A) personal property 
B) proximate cause 
C) real property 
D) risk control 
E) risk financing
F)risk management
G)risk retention
H)risk transfer
I)self-insurance
J)torts 
A) personal property 
B) proximate cause 
C) real property 
D) risk control 
E) risk financing
F)risk management
G)risk retention
H)risk transfer
I)self-insurance
J)torts

Question 4

Match the term with its definition.
-Financing loss intentionally, through a firm's cash flows

Accepted Answer

A) personal property 
B) proximate cause 
C) real property 
D) risk control 
E) risk financing
F)risk management
G)risk retention
H)risk transfer
I)self-insurance
J)torts 
A) personal property 
B) proximate cause 
C) real property 
D) risk control 
E) risk financing
F)risk management
G)risk retention
H)risk transfer
I)self-insurance
J)torts

Question 5

Morton is discussing with his insurance agent the possibility that he might lose his building and equipment in the event of a fire or windstorm. Should that happen, Morton's company would not be able to earn revenues. These two people are discussing _____ risk.

Accepted Answer

A)  disaster 
B)  pure 
C)  business 
D)  market 
A)  disaster 
B)  pure 
C)  business 
D)  market

Question 6

Claims that arise from employee lawsuits alleging wrongful terminations, sexual harassment, or discrimination in the workplace range from $50,000 to $150,000, with annual insurance premiums ranging from $12,500 to $17,500.

Accepted Answer

A) True 
 B)False

Question 7

Loss prevention is choosing not to engage in hazardous activities.

Accepted Answer

A) True 
 B)False

Question 8

Match the term with its definition.
-Coverage primarily against employee dishonesty

Accepted Answer

A) automobile insurance 
B) coinsurance clause 
C) crime insurance 
D) design defect 
E) manufacturing defect
F)marketing defect
G)noneconomic damages
H)personal property
I)punitive damages 
A) automobile insurance 
B) coinsurance clause 
C) crime insurance 
D) design defect 
E) manufacturing defect
F)marketing defect
G)noneconomic damages
H)personal property
I)punitive damages

Question 9

Perry's business is not in the safest neighborhood. He is concerned about robbery and vandalism, two types of _____ risk.

Accepted Answer

A)  business 
B)  market 
C)  pure 
D)  uninsurable 
A)  business 
B)  market 
C)  pure 
D)  uninsurable

Question 10

A small business customer slips on a wet floor (due to a slow water leak), falls, and breaks an arm. Damages that could potentially be awarded to the customer might include

Accepted Answer

A)  economic because the customer has a loss of physical abilities. 
B)  noneconomic because the customer has medical bills. 
C)  punitive due to the leak. 
D)  compensatory to cover the cost of repairing the leak. 
A)  economic because the customer has a loss of physical abilities. 
B)  noneconomic because the customer has medical bills. 
C)  punitive due to the leak. 
D)  compensatory to cover the cost of repairing the leak.

Question 11

A preferred provider organization (PPO) is less expensive than that of health maintenance organization (HMO) and is more limiting in choices of medical care providers.

Accepted Answer

A) True 
 B)False

Question 12

Disability buyout insurance

Accepted Answer

A)  is common in small firms that are single-owner operations. 
B)  protects the firm from losses due to the death of a key employee. 
C)  provides money to buy out a partner. 
D)  replaces revenue lost when a key employee is disabled. 
A)  is common in small firms that are single-owner operations. 
B)  protects the firm from losses due to the death of a key employee. 
C)  provides money to buy out a partner. 
D)  replaces revenue lost when a key employee is disabled.

Question 13

Which type of risk directly affects the employee but indirectly impacts the business?

Accepted Answer

A)  Liability 
B)  Personnel 
C)  Property 
D)  Pure 
A)  Liability 
B)  Personnel 
C)  Property 
D)  Pure

Question 14

Match the term with its definition.
-Coverage that provides benefits to a firm upon the death of key personnel

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 15

Match the term with its definition.
-Coverage that guarantees a healthy partner enough cash to buy out a partner who becomes disabled

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 16

Review and evaluation is an important step in the risk management process because

Accepted Answer

A)  conditions change and mistakes may be identified. 
B)  it is nearly impossible to evaluate risk effectively. 
C)  of the challenges in identifying small business risks. 
D)  it is difficult to select effective methods. 
A)  conditions change and mistakes may be identified. 
B)  it is nearly impossible to evaluate risk effectively. 
C)  of the challenges in identifying small business risks. 
D)  it is difficult to select effective methods.

Question 17

Match the term with its definition.
-The typical standard of care, based on what a reasonable or prudent person would do under similar circumstances

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 18

Match the term with its definition.
-Identifying the specific perils covered in a property insurance policy

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 19

Match the term with its definition.
-Economic or noneconomic damages intended to make the claimant whole by compensating the claimant for any injuries or loss arising from the negligent action

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 20

Match the term with its definition.
-A defect resulting from failure to convey to the user that hazards are associated with a product or to provide adequate instructions on safe product use

Accepted Answer

A) automobile insurance 
B) coinsurance clause 
C) crime insurance 
D) design defect 
E) manufacturing defect
F)marketing defect
G)noneconomic damages
H)personal property
I)punitive damages 
A) automobile insurance 
B) coinsurance clause 
C) crime insurance 
D) design defect 
E) manufacturing defect
F)marketing defect
G)noneconomic damages
H)personal property
I)punitive damages

Exam 23: Managing Risk

A property insurance policy is used by a business owner to insure buildings and personal property owned, but not leased, by the business.

Richard must carry workers' compensation insurance to fulfill his _____ liability obligation.

Match the term with its definition. -Minimizing potential losses by preventing, avoiding, and/or reducing risk

Match the term with its definition. -Financing loss intentionally, through a firm's cash flows

Morton is discussing with his insurance agent the possibility that he might lose his building and equipment in the event of a fire or windstorm. Should that happen, Morton's company would not be able to earn revenues. These two people are discussing _____ risk.

Claims that arise from employee lawsuits alleging wrongful terminations, sexual harassment, or discrimination in the workplace range from $50,000 to $150,000, with annual insurance premiums ranging from $12,500 to $17,500.

Loss prevention is choosing not to engage in hazardous activities.

Match the term with its definition. -Coverage primarily against employee dishonesty

Perry's business is not in the safest neighborhood. He is concerned about robbery and vandalism, two types of _____ risk.

A small business customer slips on a wet floor (due to a slow water leak), falls, and breaks an arm. Damages that could potentially be awarded to the customer might include

A preferred provider organization (PPO) is less expensive than that of health maintenance organization (HMO) and is more limiting in choices of medical care providers.

Disability buyout insurance

Which type of risk directly affects the employee but indirectly impacts the business?

Match the term with its definition. -Coverage that provides benefits to a firm upon the death of key personnel

Match the term with its definition. -Coverage that guarantees a healthy partner enough cash to buy out a partner who becomes disabled

Review and evaluation is an important step in the risk management process because

Match the term with its definition. -The typical standard of care, based on what a reasonable or prudent person would do under similar circumstances

Match the term with its definition. -Identifying the specific perils covered in a property insurance policy

Match the term with its definition. -Economic or noneconomic damages intended to make the claimant whole by compensating the claimant for any injuries or loss arising from the negligent action

Match the term with its definition. -A defect resulting from failure to convey to the user that hazards are associated with a product or to provide adequate instructions on safe product use

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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