Question 1

Self-insurance makes more sense for firms that operate one large facility than it does for firms with facilities scattered all over the country.

Accepted Answer

A) True 
 B)False

Question 2

Risk management is getting much simpler thanks to the Internet.

Accepted Answer

A) True 
 B)False

Question 3

Workers' compensation insurance guarantees payment of wages, medical care, and rehabilitation services for employees who are injured on the job.

Accepted Answer

A) True 
 B)False

Question 4

Typically, the only option that firms have to deal with pure risk is to buy insurance.

Accepted Answer

A) True 
 B)False

Question 5

Firms can take out term life-insurance policies on their top executives.

Accepted Answer

A) True 
 B)False

Question 6

Health savings accounts are managed care plans that have a high deductible.

Accepted Answer

A) True 
 B)False

Question 7

There are two different kinds of risk: passive and active.

Accepted Answer

A) True 
 B)False

Question 8

Harmon works on a highway construction crew and frequently handles explosives. His friend Willie works as a bookkeeper for a retail store. The amount of workers' compensation premiums paid by Harmon's employer will probably exceed the premiums paid by Willie's employer.

Accepted Answer

A) True 
 B)False

Question 9

Procter & Gamble Inc. is ready to launch a new shampoo in the marketplace. They will incur a speculative risk.

Accepted Answer

A) True 
 B)False

Question 10

________ risk involves a chance of either profit or loss.

Accepted Answer

A)  Insurable 
B)  Managed 
C)  Speculative 
D)  Pure 
A)  Insurable 
B)  Managed 
C)  Speculative 
D)  Pure

Question 11

Southern Deliveries has decided to manage risk by requiring drivers to wear seat belts, have a commercial driver's license, monitor any moving violations each driver obtains, and to be sure that this information is kept in the employee records. Furthermore Southern has decided to carry an insurance policy with a very large deductible, preferring to pay for small damages to its trucks out-of-pocket. Southern has built enterprise risk management into their organization.

Accepted Answer

A) True 
 B)False

Question 12

Liability losses result from property damage or injuries suffered by others for which the policyholder is held responsible.

Accepted Answer

A) True 
 B)False

Question 13

The National Highway Traffic Safety Administration (NHTSA) provides consumers with recall notices for all makes and models of cars, trucks, motorcycles, and even school buses. In terms of risk management, the purpose of the NHTSA service is:

Accepted Answer

A)  to reduce risk. 
B)  to avoid risk. 
C)  to self-insure against risk. 
D)  to make available the opportunity for vehicle owners to purchase insurance against risk. 
A)  to reduce risk. 
B)  to avoid risk. 
C)  to self-insure against risk. 
D)  to make available the opportunity for vehicle owners to purchase insurance against risk.

Question 14

In designing an addition to his successful nursing home, Steve realized that water sprinklers and smoke detectors were now required by state regulations. His existing structure already had sprinklers and detectors because he felt that this was an effective strategy to:

Accepted Answer

A)  self-insure against the risk of fire loss. 
B)  minimize the speculative risk of a fire. 
C)  reduce the risk of a fire loss. 
D)  avoid the risk of a fire loss. 
A)  self-insure against the risk of fire loss. 
B)  minimize the speculative risk of a fire. 
C)  reduce the risk of a fire loss. 
D)  avoid the risk of a fire loss.

Question 15

Worldwide risks need to be prioritized so that international funds can be spent where they can do the most good.

Accepted Answer

A) True 
 B)False

Question 16

Property insurance covers losses from fires, accidents, or theft.

Accepted Answer

A) True 
 B)False

Question 17

Most homeowners' insurance policies automatically provide adequate coverage for small home-based businesses.

Accepted Answer

A) True 
 B)False

Question 18

Going bare is a much less risky strategy for self-insurance.

Accepted Answer

A) True 
 B)False

Question 19

One advantage of health savings accounts is that healthy people can use tax-deferred money to save for their future medical needs.

Accepted Answer

A) True 
 B)False

Question 20

________ insurance replaces part of your income if you become unable to work for an extended period of time.

Accepted Answer

A)  Product liability 
B)  Workers' compensation 
C)  Professional liability 
D)  Disability 
A)  Product liability 
B)  Workers' compensation 
C)  Professional liability 
D)  Disability

Exam 24: Extension: Managing Risk

Self-insurance makes more sense for firms that operate one large facility than it does for firms with facilities scattered all over the country.

Risk management is getting much simpler thanks to the Internet.

Workers' compensation insurance guarantees payment of wages, medical care, and rehabilitation services for employees who are injured on the job.

Typically, the only option that firms have to deal with pure risk is to buy insurance.

Firms can take out term life-insurance policies on their top executives.

Health savings accounts are managed care plans that have a high deductible.

There are two different kinds of risk: passive and active.

Harmon works on a highway construction crew and frequently handles explosives. His friend Willie works as a bookkeeper for a retail store. The amount of workers' compensation premiums paid by Harmon's employer will probably exceed the premiums paid by Willie's employer.

Procter & Gamble Inc. is ready to launch a new shampoo in the marketplace. They will incur a speculative risk.

________ risk involves a chance of either profit or loss.

Liability losses result from property damage or injuries suffered by others for which the policyholder is held responsible.

The National Highway Traffic Safety Administration (NHTSA) provides consumers with recall notices for all makes and models of cars, trucks, motorcycles, and even school buses. In terms of risk management, the purpose of the NHTSA service is:

In designing an addition to his successful nursing home, Steve realized that water sprinklers and smoke detectors were now required by state regulations. His existing structure already had sprinklers and detectors because he felt that this was an effective strategy to:

Worldwide risks need to be prioritized so that international funds can be spent where they can do the most good.

Property insurance covers losses from fires, accidents, or theft.

Most homeowners' insurance policies automatically provide adequate coverage for small home-based businesses.

Going bare is a much less risky strategy for self-insurance.

One advantage of health savings accounts is that healthy people can use tax-deferred money to save for their future medical needs.

________ insurance replaces part of your income if you become unable to work for an extended period of time.

Taking Risks and Making Profits Within the Dynamic Business Environment

Understanding Economics and How It Affects Business

Doing Business in Global Markets

Demanding Ethical and Socially Responsible Behavior

How to Form a Business

Entrepreneurship and Starting a Small Business

Management and Leadership

Structuring Organizations for Todays Challenges

Production and Operations Management

Motivating Employees

Human Resource Management: Finding and Keeping the Best Employees

Dealing With Union and Employeemanagement Issues

Marketing: Helping Buyers Buy

Developing and Pricing Goods and Services

Distributing Products

Using Effective Promotions

Understanding Accounting and Financial Information

Financial Management

Using Securities Markets for Financing and Investing Opportunities

Money, Financial Institutions, and the Federal Reserve

Managing the Marketing Mix: Product, Price, Place and Promotion

Extension: Working Within the Legal Environment

Extension: Using Technology to Manage Information

Extension: Managing Personal Finances

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