Q&A Hero

Q: Which term describes land and anything physically attached to the land, such as buildings? a. Real property b. Personal property c. Replacement value of property d. Actual cash value

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

Q: Barney places his new extension ladder on a slippery surface when he leans it against the wall. He climbs up; the ladder slips out from under him and he falls. Which type of product liability may exist in this situation? a. Manufacturing since ladder may not have been intended for this use. b. Design since the ladder may not have been made to specifications c. Marketing if the manufacturer did not provide instructions on how to use the ladder. d. There is no liability. The users assumes all risk in using any type of ladder.

Q: Commercial general liability insurance covers a. business interruption expenses. b. injury to customers. c. injury to employees. d. profession liability.

Q: Concern about the employees is considered in which principle of a sound insurance program? a. What kinds of risk can be covered by insurance? b. What types of coverage should be purchased? c. How much coverage is adequate? d. All of the above will concern employees.

Q: Richard must carry workers compensation insurance to fulfill his ________________ obligation. a. professional liability b. tort liability c. contractual liability d. statutory liability

Q: Assume a contract exists between Mr. Jones, a college professor, and his student, Mr. Smith. Jones provides a syllabus, instruction, tutoring, and assessments of learning but Smith fails the class. Which of the following elements is absent in this case? a. Existence of a legal duty between the parties. b. Failure to provide the appropriate standard of care. c. Presence of injury or damages. d. Evidence that the negligent act is the proximate cause of the loss.

Q: The striking dock workers on the west coast refused to unload the ships carrying merchandise for retail stores. These stores suffered loss of revenue during the Christmas season, their highest earnings period of the year. This revenue reduction is ________________ that ___________ covered by insurance. a. a direct loss, can be b. indirect loss, can be c. direct loss, cannot be d. indirect loss, cannot be

Q: A coinsurance provision requires that a property be insured for at least ____ percent of its value. a. 60 b. 70 c. 80 d. 90

Q: 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 Philips actions. a. premises liability clause b. indemnification clause c. operations liability clause d. lessors release of action clause

Q: Which insurance coverage is required by law in most states? a. Workers compensation b. Product liability insurance c. Key executive coverage d. Employee bonding

Q: The cost to replace or replicate property at todays prices is described by________. a. real property b. personal property c. replacement value of property d. actual cash value

Q: Compensatory damages include ________ damages. a. economic b. breach c. tort d. punitive

Q: Quentin is getting quotes for insurance on his building. His agent recommends he purchase enough to cover the ___________________ even though this amount is more than Quentin paid for it. a. replacement value b. actual cash value c. conisurance value d. minimum value

Q: Harolds ownership of a moving van for use in his business represents which form of risk? a. Uninsurable risk b. Pure risk c. Market risk d. Insurable risk

Q: Identifying in an insurance policy the specific perils covered is a(n) __________ approach. a. no-risk b. named-peril c. coinsurance d. all-risk

Q: As a general rule, only ______ is insurable. a. business risk b. market risk c. pure risk d. risk

Q: Dougs BOP on his fishing guide business excludes property losses due to the wakes of other fishing boats. This example illustrated the ____ approach to property insurance. a. foreseen risk b. insurance-to-value c. all-risk d. named-peril

Q: Pain, suffering, mental anguish and loss of physical abilities are included in which type of damages in a tort case? a. non economic b. compensatory c. economic d. punitive

Q: Business interruption insurance covers a. debts to suppliers. b. shoplifting. c. lost income. d. defective products.

Q: A unique, attractive feature of a BOP is that both real and personal property are valued on a. an appraised cash value basis. b. a market-adjusted depreciated value basis. c. a replacement-cost basis. d. a proximal-to-value basis.

Q: Securing insurance coverage for all major potential losses would involve making certain that insurance covers the full replacement value of the firms real and personal property. a. True b. False Indicate the answer choice that best completes the statement or answers the question.

Q: Specific and aggregate stop loss limits would be the best insurance plans of small businesses which have at least 80 employees. a. True b. False

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

Q: Pure risk refers to a situation where only loss or no loss can occurthere is no potential gain. a. True b. False

Q: One risk that small businesses normally cover is loss due to the disability of a partner or other key employee of the company. a. True b. False

Q: Market risk is the possibility of losses associated with the assets and earnings potential of a company, including the firms reputation. a. True b. False

Q: Risk is the possibility of suffering harm or pain. a. True b. False

Q: Since the small business owner needs to rely heavily on an insurance agent for advice, risk management and insurance management are synonymous. a. True b. False

Q: Loss reduction is defined as preventing losses from ever happening. a. True b. False

Q: 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. a. True b. False

Q: Self-insurance requires designating part of a firms insurance proceeds to provide life insurance on key employees. a. True b. False

Q: Wrongful acts or omissions for which an injured party can take legal action against the wrongdoer to seek monetary damages are called statutory liability. a. True b. False

Q: For the most part, the dollar value of employment practice claims ranges from $50,000 to $150,000, with insurance premiums ranging from $12,500 to $17,500. a. True b. False

Q: Monitoring social media is a form of risk transfer. a. True b. False

Q: Market risk is uncertainty associated with a situation where only loss or no loss can occur. a. True b. False

Q: Flood insurance can be purchased for only real property. a. True b. False

Q: A lease on a real property structure will relieve the lessee of any damage or loss to the leased premises. a. True b. False

Q: Partially self-funded insurance programs that limit the self-insured portion of an employees medical coverage to a specific amount is commonly referred to as an aggregate stop loss limit. a. True b. False

Q: Small businesses are particularly vulnerable to employee fraud because of weak financial controls. a. True b. False

Q: The companys ability to absorb losses will determine what smaller potential losses will be insured. a. True b. False

Q: A consulting firm that typically does not have clients visit its business location would have minimal premises liability exposure. a. True b. False

Q: Property insurance that covers all direct damage to property except damage caused by perils specifically excluded is called CGL. a. True b. False

Q: Business interruption insurance pays for lost income following the interruption of business operations. a. True b. False

Q: Business risks can be classified into two broad categoriesasset risk and pure risk. a. True b. False

Q: Real property risks include damage to buildings. a. True b. False

Q: Risk financing is the action of making funds available to cover losses that could not be eliminated by risk control. a. True b. False

Q: Indemnification clauses should be reviewed by an insurance agent or broker to limit liabilities to a small business. a. True b. False

Q: Funds transfer fraud provides coverage primarily against employee dishonesty. a. True b. False

Q: ACV refers to the depreciated value of a property. a. True b. False

Q: Long-term investments are the focus of a. cash budgeting. b. capital budgeting. c. corporate planning. d. investment planning.

Q: Accounts receivable financing might include a. using a bank, lender, or other finance company. b. lending money against receivables and aging accounts receivable. c. providing cash discounts and charging interest on delinquent accounts. d. giving a customer more time to pay.

Q: Nicholas wouild like to improve the management of his companys accounts payable. One metric he might find useful is: a. days in credit. b. days in inventory. c. days in payables. d. days sales outstanding.

Q: The goal of the managing cash conversion period is to _____ the number of days. a. increase b. maintain c. decrease d. match the industry average for

Q: Lucinda has decided to use a _______________ to speed up the processing of inovice payments. a. customer box. b. deposit box. c. lock box. d. mail box.

Q: Pearl has been asked by her boss to manage the companys working capital. This means Pearl is now in charge of a. cash, fixed assets, and inventory. b. cash, accounts receivable, inventory, and accounts payable. c. cash, accounts receivable, and fixed assets. d. accounts receivable, accounts payable, and long-term investments.

Q: The cash conversion period is the time between a. cash payment for inventory and collection of accounts receivable. b. placement of an order and cash payment for it. c. receipt of inventory and cash payment for it. d. sale of inventory and cash collection of accounts receivable.

Q: Working capital management focuses on the attractiveness of long-run investment opportunities. a. True b. False Indicate the answer choice that best completes the statement or answers the question.

Q: The payback period technique does not consider the time value of money. a. True b. False

Q: Use of the accounting return on investment technique answers the question, How long will it take to recover the original investment outlay? a. True b. False

Q: The cash conversion period is the time period between ordering inventory and receiving cash for its sale. a. True b. False

Q: Batching may hold up receipts of customer payments. a. True b. False

Q: Software programs can provide adequate assistance in inventory identification and control. a. True b. False

Q: The cash conversion period equals the days in inventory plus the days sales outstanding minus days in payables. a. True b. False

Q: During the cash conversion period, the firm has the benefit of the financing provided by the supplier. a. True b. False

Q: In managing accounts payable, the principle of Buy now, pay later allows the small business to postpone a payment. a. True b. False

Q: Pledging accounts receivable can indicate troublesome accounts. a. True b. False

Q: The average collection period is the number of days that a firm extends credit to its customers. a. True b. False

Q: A firms net cash flow may be determined by examining the companys bank account. a. True b. False

Q: Accounting profits are identical to actual cash flows. a. True b. False

Q: A shortcoming of the accounting return on investment technique is that it is based on accounting profits rather than cash flows received. a. True b. False

Q: Historically, many small business owners have relied on quantitative analysis in making capital budgeting decisions. a. True b. False

Q: Managing cash flow well will give a company a competitive edge over their competitors. a. True b. False

Q: The last step in managing inventory is to discover how long inventory has been at the company. a. True b. False

Q: A firm will have difficulty attracting investors if investments in the firm have internal rates of return below an investors required rate of return. a. True b. False

Q: Discounted cash flow techniques take into consideration that cash received today is more valuable than cash received at a later date. a. True b. False

Q: Revenue is recorded at the time a sale is made, but cash receipts are recorded when money actually flows into the firm. a. True b. False

Q: In a healthy business, cash flow is typically even. a. True b. False

Q: Management should be working continuously to shorten the working capital cycle. a. True b. False

Q: The calculation for days in payables is very similar to days sales outstanding and days in inventory. a. True b. False