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.

Question 2

Review and evaluate 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)  of the difficulty in selecting 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)  of the difficulty in selecting effective methods.

Question 3

Match the term with its definition. Some terms may not be used.
-A managed-care network providing health insurance that is more expensive but offers a broader choice of medical providers

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 4

Real property risks include damage to buildings.

Accepted Answer

A) True 
 B)False

Question 5

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

Question 6

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 7

Which risk type directly affects the employee but indirectly impact the business?

Accepted Answer

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

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

List the basic principles in evaluating an insurance program. How can an insurance agent assist a small business owner?

Accepted Answer

Basic principles in evaluating an insura

Question 10

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

Question 11

Driving as safely as possible is an example of loss

Accepted Answer

A)  avoidance. 
B)  control. 
C)  prevention. 
D)  reduction. 
A)  avoidance. 
B)  control. 
C)  prevention. 
D)  reduction.

Question 12

Match the term with its definition. Some terms may not be used.
-Wrongful acts or omissions for which an injured party can take legal action against the wrongdoer for monetary damages

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

Match the term with its definition. Some terms may not be used.
-A provision in a property insurance policy that requires the owner to have insurance for at least 80 percent of what it would cost to rebuild the building or replace the personal property

Accepted Answer

A) Automobile insurance 
B) Coinsurance clause 
C) Crime insurance 
D) Design defect 
E) Manufacturing defect
F)Marketing defect
G)Noneconomic damages
H)Partially self-funded program
I)Proximate cause
J)Punitive damages
K)Workers' compensation legislation 
A) Automobile insurance 
B) Coinsurance clause 
C) Crime insurance 
D) Design defect 
E) Manufacturing defect
F)Marketing defect
G)Noneconomic damages
H)Partially self-funded program
I)Proximate cause
J)Punitive damages
K)Workers' compensation legislation

Question 14

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 15

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 16

For the most part, the dollar value of employment practice claims ranges from $100,000 to $250,000, with insurance premiums ranging from $12,500 to $17,500.

Accepted Answer

A) True 
 B)False

Question 17

Match the term with its definition. Some terms may not be used.
-Coverage that designates part of a firm's earnings as a cushion against possible future losses

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 18

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 19

Commercial general liability insurance covers

Accepted Answer

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

Question 20

Match the term with its definition. Some terms may not be used.
-Financing loss intentionally through a firm's cash flows

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

Exam 23: Managing Risk in the Small Business

A "prudent person" is also known as:

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

Match the term with its definition. Some terms may not be used. -A managed-care network providing health insurance that is more expensive but offers a broader choice of medical providers

Real property risks include damage to buildings.

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:

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.

Which risk type directly affects the employee but indirectly impact the business?

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

List the basic principles in evaluating an insurance program. How can an insurance agent assist a small business owner?

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

Driving as safely as possible is an example of loss

Match the term with its definition. Some terms may not be used. -Wrongful acts or omissions for which an injured party can take legal action against the wrongdoer for monetary damages

Match the term with its definition. Some terms may not be used. -A provision in a property insurance policy that requires the owner to have insurance for at least 80 percent of what it would cost to rebuild the building or replace the personal property

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?

Pure risk is

For the most part, the dollar value of employment practice claims ranges from $100,000 to $250,000, with insurance premiums ranging from $12,500 to $17,500.

Match the term with its definition. Some terms may not be used. -Coverage that designates part of a firm's earnings as a cushion against possible future losses

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

Commercial general liability insurance covers

Match the term with its definition. Some terms may not be used. -Financing loss intentionally through a firm's cash flows

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

A: Managing Risk in the Small Business

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