Question 1

Risk financing is the action of making funds available to cover losses that could not be eliminated by risk control.

Accepted Answer

A) True 
 B)False  True

Question 2

Since the small business owner needs to rely heavily on an insurance agent for advice, risk management and insurance management are synonymous.

Accepted Answer

A) True 
 B)False  False

Question 3

Match the term with its definition. Some terms may not be used.
-Insurance that provides a healthy partner the cash to buy out a partner who becomes ill

Accepted Answer

A) Actual cash value 
B) Aggregate stop loss limit 
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
K)Specific stop loss limit 
A) Actual cash value 
B) Aggregate stop loss limit 
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
K)Specific stop loss limit D

Question 4

Discuss the differences between pure risk, business risk and market risk.

Accepted Answer

Pure risk is the uncertainty associated

Question 5

Small businesses are particularly vulnerable to employee fraud because of weak financial controls.

Accepted Answer

A) True 
 B)False

Question 6

A unique, attractive feature of a BOP is that both real and personal property are valued on

Accepted Answer

A)  an appraised cash value basis. 
B)  a market-adjusted depreciated value basis. 
C)  a replacement-cost basis. 
D)  a proximal-to-value basis. 
A)  an appraised cash value basis. 
B)  a market-adjusted depreciated value basis. 
C)  a replacement-cost basis. 
D)  a proximal-to-value basis.

Question 7

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 8

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?

Accepted Answer

A)  $0 
B)  $15,000 
C)  $20,000 
D)  $10,000 
A)  $0 
B)  $15,000 
C)  $20,000 
D)  $10,000

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Doug works security at a bar and was recently hurt by a patron who was being forcibly removed from the premises. He believes he has been wrongfully treated by the bar. What four elements must be in place for Doug to make a claim that the bistro has been negligent?

Accepted Answer

-Existence of a legal duty between the p

Question 11

Pain, suffering, mental anguish and loss of physical abilities are included in which type of damages in a tort case?

Accepted Answer

A)  non economic 
B)  compensatory 
C)  economic 
D)  punitive 
A)  non economic 
B)  compensatory 
C)  economic 
D)  punitive

Question 12

Match the term with its definition. Some terms may not be used.
-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) Disability insurance 
E) Economic damages
F)Health maintenance organization
G)Market risk
H)Named-peril approach
I)Peril
J)Preferred provider organization
K)Pure risk 
A) All-risk approach 
B) Business risk 
C) Compensatory damages 
D) Disability insurance 
E) Economic damages
F)Health maintenance organization
G)Market risk
H)Named-peril approach
I)Peril
J)Preferred provider organization
K)Pure risk

Question 13

After explaining the different types of property and losses, which ones were an issue for Sandy Whann, owner of Leidenheimer Baking Company?

Accepted Answer

There are two general types of property.

Question 14

Beth has started an elder care service. Employees work with persons who are not ready to leave their home but have some disability that prevents them from being fully mobile. What should Beth consider in managing the associated risk?

Accepted Answer

The company should identify ways for ris

Question 15

Jackie owns a building in a downtown area. Her building is used for office space and is rented to a current business tenant. What kind of risk is associated with this property and is this type of risk insurable?

Accepted Answer

Jackie has pure risk and market risk wit

Question 16

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 17

Philip leases retail space in a building owned by Roger. The lease agreement contains a(n) _____________ excusing Roger from responsibility for any financial consequences of Philip's actions.

Accepted Answer

A)  premises liability clause 
B)  indemnification clause 
C)  operations liability clause 
D)  lessor's release of action clause 
A)  premises liability clause 
B)  indemnification clause 
C)  operations liability clause 
D)  lessor's release of action clause

Question 18

Identifying in an insurance policy the specific perils covered is a __________ approach.

Accepted Answer

A)  no-risk 
B)  named-peril 
C)  coinsurance 
D)  all-risk 
A)  no-risk 
B)  named-peril 
C)  coinsurance 
D)  all-risk

Question 19

A delivery truck owned by Martin's Lumber backed into a car owned by Bonnie. Bonnie asked Martin's Lumber to pay for the repairs to her car. Bonnie is asking for:

Accepted Answer

A)  exemplary damages. 
B)  non-economic damages. 
C)  compensatory damages. 
D)  punitive damages. 
A)  exemplary damages. 
B)  non-economic damages. 
C)  compensatory damages. 
D)  punitive damages.

Question 20

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

Exam 23: A: Managing Risk in the Small Business

Risk financing is the action of making funds available to cover losses that could not be eliminated by risk control.

Since the small business owner needs to rely heavily on an insurance agent for advice, risk management and insurance management are synonymous.

Match the term with its definition. Some terms may not be used. -Insurance that provides a healthy partner the cash to buy out a partner who becomes ill

Discuss the differences between pure risk, business risk and market risk.

Small businesses are particularly vulnerable to employee fraud because of weak financial controls.

A unique, attractive feature of a BOP is that both real and personal property are valued on

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

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

Doug works security at a bar and was recently hurt by a patron who was being forcibly removed from the premises. He believes he has been wrongfully treated by the bar. What four elements must be in place for Doug to make a claim that the bistro has been negligent?

Pain, suffering, mental anguish and loss of physical abilities are included in which type of damages in a tort case?

Match the term with its definition. Some terms may not be used. -Compensatory damages that relate to economic loss, such as medical expenses and loss of income

After explaining the different types of property and losses, which ones were an issue for Sandy Whann, owner of Leidenheimer Baking Company?

Beth has started an elder care service. Employees work with persons who are not ready to leave their home but have some disability that prevents them from being fully mobile. What should Beth consider in managing the associated risk?

Jackie owns a building in a downtown area. Her building is used for office space and is rented to a current business tenant. What kind of risk is associated with this property and is this type of risk insurable?

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.

Philip leases retail space in a building owned by Roger. The lease agreement contains a(n) _____________ excusing Roger from responsibility for any financial consequences of Philip's actions.

Identifying in an insurance policy the specific perils covered is a __________ approach.

A delivery truck owned by Martin's Lumber backed into a car owned by Bonnie. Bonnie asked Martin's Lumber to pay for the repairs to her car. Bonnie is asking for:

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.

The Entrepreneurial Life

Integrity and Ethics: Foundations for Success in Small Business

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 Business

Professional Management and the Small Business

Managing Human Resources

Managing Operations

Managing the Firms Assets

Managing Risk in the Small Business

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