Question 1

Match the term with its definition.
-Compensatory damages that relate to economic loss, such as medical expenses and loss of income

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 2

Doug's property insurance on his fishing guide business excludes property losses due to the wakes of other fishing boats. This example illustrates the _____ approach to property insurance.

Accepted Answer

A)  foreseen risk 
B)  insurance-to-value 
C)  all-risk 
D)  named-peril 
A)  foreseen risk 
B)  insurance-to-value 
C)  all-risk 
D)  named-peril

Question 3

Pure risk is

Accepted Answer

A)  a chance all entrepreneurs take. 
B)  a condition in which there is a possibility that an adverse deviation from a desired outcome will occur. 
C)  a probability that adverse conditions will result. 
D)  the uncertainty associated with a situation where only loss or no loss can occur. 
A)  a chance all entrepreneurs take. 
B)  a condition in which there is a possibility that an adverse deviation from a desired outcome will occur. 
C)  a probability that adverse conditions will result. 
D)  the uncertainty associated with a situation where only loss or no loss can occur.

Question 4

Match the term with its definition.
-A defect resulting from a problem that occurs during the manufacturing process, causing the product to subsequently not be made according to specifications

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 5

Securing insurance coverage for all major potential losses would involve making certain that insurance covers the full replacement value of the firm's real and personal property.

Accepted Answer

A) True 
 B)False

Question 6

Match the term with its definition.
-Land and anything physically attached to the land, such as buildings

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 7

Quentin is getting quotes for insurance on his building. His agent recommends he purchase enough to cover the _____ value, even though this amount is more than Quentin paid for it.

Accepted Answer

A)  replacement 
B)  actual cash 
C)  conisurance 
D)  minimum 
A)  replacement 
B)  actual cash 
C)  conisurance 
D)  minimum

Question 8

The pure risks that any business faces can be categorized as

Accepted Answer

A)  property, liability, and physical. 
B)  property, liability, and personnel. 
C)  market, property, and personnel. 
D)  property, liability, and market. 
A)  property, liability, and physical. 
B)  property, liability, and personnel. 
C)  market, property, and personnel. 
D)  property, liability, and market.

Question 9

Damage to a building by flooding is an example of a

Accepted Answer

A)  benign neglect loss. 
B)  direct loss. 
C)  tort-based liability claim. 
D)  depreciated cash value loss. 
A)  benign neglect loss. 
B)  direct loss. 
C)  tort-based liability claim. 
D)  depreciated cash value loss.

Question 10

The idea behind an indemnification clause is to shift the responsibility to the party with the most control over the risk exposure.

Accepted Answer

A) True 
 B)False

Question 11

One risk that small businesses normally cover is loss due to the disability of a partner or other key employees of the company.

Accepted Answer

A) True 
 B)False

Question 12

Match the term with its definition.
-Ways of coping with risk that are designed to preserve the assets and earning power of a firm

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 13

As a rule, only _____ risk is insurable.

Accepted Answer

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

Question 14

Match the term with its definition.
-The possibility of losses associated with the assets and earnings potential of a firm

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 15

Self-insurance simply means having no insurance.

Accepted Answer

A) True 
 B)False

Question 16

A contractual clause that requires one party to assume the financial consequences of another party's legal liabilities is called a(n)

Accepted Answer

A)  worker's compensation clause. 
B)  extra clause. 
C)  indemnification clause. 
D)  tort. 
A)  worker's compensation clause. 
B)  extra clause. 
C)  indemnification clause. 
D)  tort.

Question 17

Concern about the replacement value is considered in which principle of a sound insurance program?

Accepted Answer

A)  Identify business risks that can be insured. 
B)  Secure insurance coverage for all major potential losses. 
C)  Consider the feasibility and affordability of insuring smaller potential losses. 
D)  Review and evaluate. 
A)  Identify business risks that can be insured. 
B)  Secure insurance coverage for all major potential losses. 
C)  Consider the feasibility and affordability of insuring smaller potential losses. 
D)  Review and evaluate.

Question 18

For a person to be found guilty of a negligent act, the negligent act must be the _____ cause of the loss in a tort liability claim.

Accepted Answer

A)  assumed 
B)  compensatory 
C)  proximate 
D)  statutory 
A)  assumed 
B)  compensatory 
C)  proximate 
D)  statutory

Question 19

Business interruption insurance covers

Accepted Answer

A)  debts to suppliers. 
B)  shoplifting. 
C)  lost income. 
D)  defective products. 
A)  debts to suppliers. 
B)  shoplifting. 
C)  lost income. 
D)  defective products.

Question 20

Match the term with its definition.
-Designating part of a firm's earnings as a cushion against future losses

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

Exam 23: Managing Risk

Match the term with its definition. -Compensatory damages that relate to economic loss, such as medical expenses and loss of income

Doug's property insurance on his fishing guide business excludes property losses due to the wakes of other fishing boats. This example illustrates the _____ approach to property insurance.

Pure risk is

Match the term with its definition. -A defect resulting from a problem that occurs during the manufacturing process, causing the product to subsequently not be made according to specifications

Securing insurance coverage for all major potential losses would involve making certain that insurance covers the full replacement value of the firm's real and personal property.

Match the term with its definition. -Land and anything physically attached to the land, such as buildings

Quentin is getting quotes for insurance on his building. His agent recommends he purchase enough to cover the _____ value, even though this amount is more than Quentin paid for it.

The pure risks that any business faces can be categorized as

Damage to a building by flooding is an example of a

The idea behind an indemnification clause is to shift the responsibility to the party with the most control over the risk exposure.

One risk that small businesses normally cover is loss due to the disability of a partner or other key employees of the company.

Match the term with its definition. -Ways of coping with risk that are designed to preserve the assets and earning power of a firm

As a rule, only _____ risk is insurable.

Match the term with its definition. -The possibility of losses associated with the assets and earnings potential of a firm

Self-insurance simply means having no insurance.

A contractual clause that requires one party to assume the financial consequences of another party's legal liabilities is called a(n)

Concern about the replacement value is considered in which principle of a sound insurance program?

For a person to be found guilty of a negligent act, the negligent act must be the _____ cause of the loss in a tort liability claim.

Business interruption insurance covers

Match the term with its definition. -Designating part of a firm's earnings as a cushion against future losses

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

Managing the Firms Assets

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