Exam 23: Managing Risk in the Small Business

Risk management in a small firm is essentially the same as risk management in a large firm.

Which of the following is not one of the legal liabilities that may arise from various business activities?

Purchasing a fidelity bond on the company treasurer is a form of risk ____.

Which of the following describe land and anything physically attached to the land, such as buildings?

Self-insurance means

Risk management and insurance management are synonymous.

You Make the Call-Situation 2 Pansy Ellen Essman is a 42-year-old grandmother who is chairperson of a company that does $5 million in sales each year. Her company, Pansy Ellen Products, Inc., based in Atlanta, Georgia, grew out of a product idea that Essman had as she was bathing her squealing, squirming granddaughter in the bathroom tub. Her idea was to produce a sponge pillow that would cradle a child in the tub, thus freeing the caretaker's hands to clean the baby. From this initial product, the company expanded its product line to include nursery lamps, baby food organizers, strollers, and hook-on baby seats. Essman has seemingly managed her product mix risk well. However, she is concerned that other sources of business risk may have been ignored or slighted.

If a delivery truck is damaged in an accident, impairing the ability of a business to get its goods to customers, the type of loss incurred is a(n)

Compensatory damages include ____ damages.

Small businesses are particularly vulnerable to employee fraud because their control systems are characteristically ineffective.

A risk management program requires all of the following except

General liability insurance covers

Assume that the physical property of a business is valued at $50,000. The company's commercial property policy contains a coinsurance clause with a stated percentage of 80 percent. The company insures the property for $30,000 (75 percent of the specified minimum). The company incurs a fire loss of $20,000. How much of the loss will the insurance company pay for?

Wrongful acts or admissions for which an injured party can take legal action against the wrongdoer to seek monetary damages is called contractual liability.

Product liability could be classified as a source of tort liability.

An approach to property insurance that covers all direct damage to property except damage caused by perils specifically excluded is called the all-risk approach.

Explain the concept of coinsurance, as found in some commercial property policies.

Self-insurance requires designating part of a firm's earnings as a cushion against possible future losses.

List the advantages of a Business Owners Policy.

Market risk is uncertainty associated with a situation where only loss or no loss can occur.